The European Central Bank (ECB) is leaving key interest rates in the Eurozone unchanged. The next interest rate meeting is now on June 6th – will the interest rate turnaround come then? There are a few things that point to that.
Although inflation has been falling for months and the economy continues to weaken, the European Central Bank (ECB) is not changing key interest rates in the euro area for the fifth time in a row. The ECB Council decided this at its meeting, as the central bank announced in Frankfurt.
The deposit rate that financial institutions receive from the ECB for parking excess funds, which sets the trend for the financial market, remains initially at 4.0 percent. The main refinancing rate, at which commercial banks can obtain fresh money from the central bank, has been less important for a long time, remains at 4.5 percent.
“Easing” of monetary policy in prospect
At the same time, however, the ECB is taking a new course and is heading for an imminent first interest rate cut. “Should its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission further strengthen the Governing Council’s confidence that inflation is moving sustainably towards the target, an easing of the current monetary policy tightening would be appropriate,” they said Euro Guardian.
The ECB has been holding on to the record high key rates since September 2023, when it raised interest rates for the tenth time in a row in the fight against inflation. Inflation has now fallen to 2.4 percent in the euro zone. The ECB’s target of 2.00 percent, which it aims to achieve as the optimal level for the currency area in the medium term, is now within reach.
Turnaround in June?
In recent weeks, a number of monetary authorities have already expressed the view that the interest rate meeting on June 6th could be the appropriate starting point for the interest rate turnaround.
Despite the decline in inflation, experts also did not expect the first interest rate cut until June. “The majority in the ECB Council will probably want to wait until June, because then not only will the new projections from the ECB experts be available, but the wage indicators that are currently important for the central bankers will then cover almost the first half of the year,” it says in an outlook Commerzbank.