At present, minimum reserves are remunerated at the ECB's deposit rate, now 3.5% after a string of interest rate hikes to tame inflation.
The sources said some staff advocate leaving an adjustment of the corridor until the ECB ends its current tightening cycle, with the final move a change in the deposit rate.
The ECB has given itself a year-end deadline to decide, the sources said, although details could take longer to work out.
Now, the deposit rate effectively sets an interest rate floor, similar to the way U.S. Federal Reserve rates function and the sources indicated this was likely to remain the case.
Such a "demand driven floor-system" would let the ECB add excess liquidity as needed as opposed to running a permanently oversized balance sheet.
Persons:
Isabel Schnabel, Catherine Evans
Organizations:
Staff, Senior European Central Bank, Reuters, Market, ECB, Federal, Bank of England, Thomson
Locations:
Helsinki, SINTRA, Portugal, Sintra, Finland