European Central Bank's Deposit Facility

The European Central Bank's Deposit Facility is a tool that allows banks to deposit their excess reserves overnight. This facility pays interest, providing banks with a safe place to park their extra cash when they don’t want to lend it out. The interest rate set for this facility helps influence overall interest rates in the economy. By managing this rate, the ECB aims to control inflation and stabilize the economy, helping to ensure that financial institutions have liquidity and that the economy runs smoothly.