The European Central Bank is not changing its monetary policy direction for the time being. As expected, it is leaving the key interest rate at the current level of 4.5 percent for the third time in a row.
Despite the ongoing economic downturn and an easing price surge, the European Central Bank (ECB) monetary authorities once again left interest rates in the euro area unchanged at their first monetary policy meeting. “The future decisions of the ECB Governing Council will ensure that key interest rates are set at a sufficiently restrictive level for as long as necessary,” they said in Frankfurt today. On average, experts had expected the interest rate break.
ECB sticks to its direction for the third time
The ECB had already kept its feet still in October and December and held out the prospect of a longer-term interest rate plateau. The deposit rate that financial institutions receive from the central bank for parking excess funds, and which is the relevant interest rate on the financial market, remains at the record level of 4.00 percent. The less important main refinancing rate is 0.5 percentage points higher.
There has been speculation on the financial markets for a long time that there will be significant interest rate cuts this year in view of the downward trend in inflation. Lower interest rates are currently expected to total a total of 1.27 percentage points. The first rate cut is expected in April or June. Two weeks ago, even more significant interest rate cuts totaling 1.50 percentage points were considered possible.
However, a number of monetary authorities, including ECB President Christine Lagarde and Bundesbank boss Joachim Nagel, used the World Economic Forum in Davos to curb the escalating interest rate fantasies. Lagarde pointed out, among other things, that the ECB might not have data on this year’s collective bargaining agreements in the euro countries until late spring. These are considered an important barometer for the further development of inflation.