After ten interest rate increases in a row, the European Central Bank is leaving interest rates in the euro area unchanged for the time being. According to a decision by the ECB Council, the key interest rate remains at 4.5 percent.
After ten interest rate increases in a row, the euro currency watchdogs are leaving interest rates unchanged for the time being. The key interest rate remains at 4.5 percent, as the European Central Bank (ECB) announced after an external meeting of the ECB Governing Council in Athens. Many economists had expected that the central bank would not raise interest rates any further for the time being. Inflation in the euro area had recently fallen.
At the same time, concerns about the economy are growing. “Based on its current assessment, the Governing Council is of the opinion that the key ECB interest rates are at a level which, if maintained for long enough, will make a significant contribution to this objective,” the ECB said.
According to the key interest rate, banks can get fresh money from the central bank. Der Einlagenzins, den Banken wiederum für geparkte Gelder erhalten, verharrt bei 4,0 Prozent. Dies ist das höchste Niveau seit Bestehen der Währungsunion 1999, die mittlerweile 20 Länder umfasst.
Series of interest rate hikes
Last year, inflation was at times in double digits as a result of Russia’s war of aggression against Ukraine. Since July 2022, the ECB has been countering this development with an unprecedented series of interest rate increases. Higher interest rates make loans more expensive, which can slow down demand and counteract high inflation rates. More expensive loans are also a burden for the economy because loan-financed investments become more expensive.
The ECB is aiming for stable prices in the medium term with an inflation rate of 2.0 percent. Inflation in the common currency area weakened significantly in September. The annual inflation rate fell to 4.3 percent from 5.2 percent in August.
At the same time, the economic outlook for the euro area has deteriorated. The ECB recently expected an increase in gross domestic product of 0.7 percent this year. In July, an increase of 0.9 percent was predicted. According to estimates by the federal government and many economists, Europe’s largest economy, Germany, will even shrink slightly this year.
Darüber hinaus ist für die Währungshüter die Nahost-Krise als neuer Unsicherheitsfaktor hinzugekommen, der sich unter anderem auf die Energiepreise auswirken könnte. It is therefore eagerly awaited how ECB President Christine Lagarde will comment on the economy and the future path of interest rates. The question is whether it explicitly keeps the possibility of further interest rate increases open or whether it gives a more neutral outlook and emphasizes the data dependence of every decision.