How the End of Negative Rates Boosted Demand for Fixed-Term Deposits in the Eurozone

Abstract

This paper examines how the European Central Bank’s (ECB) decision to end its negative interest rate policy in 2022 catalyzed a sharp increase in demand for fixed-term deposits across the Eurozone. Drawing on macroeconomic theory, behavioral finance, and empirical data from the ECB and national central banks, the study explores the mechanisms through which interest rate normalization reshaped depositor incentives and restructured the funding profiles of banks. The analysis highlights how the reintroduction of positive nominal and real deposit rates restored the traditional liquidity–yield trade-off, prompting households and firms to re-engage with term deposit products after a decade of distortionary monetary policy. The findings underscore the role of interest rate policy in influencing savings behavior, monetary transmission, and banking system stability, and offer critical insights into the long-term implications of unconventional monetary policy regimes.