The European Central Bank did not change the key interest rate in the euro zone for the second time in a row. The key interest rate at which commercial banks can borrow money from the ECB remains at 4.5 percent.
The European Central Bank (ECB) is leaving interest rates in the euro area unchanged for the second time in a row. The key interest rate at which banks can obtain fresh money from the central bank remains at 4.5 percent following a decision by the ECB Council, as the monetary authorities announced today. After an unprecedented series of ten interest rate increases in a row in the fight against high inflation, the monetary authorities stopped tightening interest rates for the first time in October.
The main reason for the renewed pause in interest rates is that inflation in the euro area fell significantly in November. According to the statistics office Eurostat, consumer prices were 2.4 percent above the level of the same month last year, after 2.9 percent in October.
Fed also leaves interest rates unchanged
At the same time, concerns about the economy are growing: 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. And the economy in the euro area is already weakening. According to Eurostat, economic output shrank by 0.1 percent in the third quarter compared to the previous quarter.
The US Federal Reserve (Fed) had previously left the key interest rate in the USA unchanged for the third time in a row and promised interest rate cuts in the coming year. Many economists expect that the euro’s monetary authorities will also lower interest rates next year.