Deposit Facility Rate

The Deposit Facility Rate is the interest banks receive for overnight deposits at national central banks. The European Central Bank sets it through its Governing Council as one of 3 key rates that steer the policy stance. It covers the euro area with no cap on deposit amounts and no sample, since it is a single administered rate. It is not a market rate like €STR and not interest paid to households, while the 2% inflation target anchors rate decisions.

The Governing Council decides the rate every 6 weeks at a monetary policy meeting, and the set level stays in force until a new decision. Decisions appear same day in a press release at 14:15 CET, followed by a press conference with statement and questions at 14:45 CET. A new level applies from a later stated date alongside the 2 other key rates, asset purchase and lending stance, and the policy statement. Meeting accounts follow later, history is never revised, and markets read each level with meeting-by-meeting guidance and no preset path.

The rate has no components or weights, since the Governing Council sets the single level by decision.

• Main refinancing operations rate: weekly bank borrowing cost against collateral, set above this rate.
• Marginal lending facility rate: overnight bank borrowing cost, set above the main refinancing rate.
• Corridor: the key rates together form a band that bounds overnight market rates.

On 21 July 2022 the Council raised the 3 rates by 50 basis points, taking this rate to 0.00% with effect from 27 July 2022. The move was larger than signalled, ended 8 years of negative rates, and shifted decisions to a meeting-by-meeting approach tied to incoming data. The Council approved the Transmission Protection Instrument the same day to support smooth transmission across euro area countries.

On 8 September 2022 the Council raised rates by 75 basis points, taking this rate to 0.75% with effect from 14 September 2022. Inflation had reached 9.1% in August 2022, and the two-tier system was suspended by setting the multiplier to zero.

1. Governing Council decision: the level is set with no formula, no weighting, and no seasonal adjustment, since the value is decided rather than measured.
2. Overnight interest: each overnight deposit earns simple interest on actual days divided by 360, paid at maturity on the next TARGET2 day. When the rate is negative the depositor pays, since the charge applies to the deposit holder.
3. Worked illustration: as an illustration only, EUR 100000000 placed for 1 night at 2.50% per annum, or 0.0250, earns EUR 6944.44. The sum equals 100000000 multiplied by 0.0250 multiplied by 1 divided by 360. The rate divided by 100 converts the percent to a decimal.