“Laddle of the yeast is very high”
ECB director Schnabel sees hardly any scope for interest rate reduction
Will the European Central Bank continue to reduce key interest rates at the end of July? Director Isabel Schnabel sees high hurdles – and warns of unclear episodes in the customs dispute with Donald Trump.
The European Central Bank has reduced the key interest seven times in a row, now ECB director Isabel Schnabel advocates an end to the series. The interest is in a “good area and the bar for another interest rate is very high,” said the Germans to the financial portal “Econostream Media” shortly before the ECB interest rate on July 24.
The decline in inflation is largely as expected. You are about to “successfully master the past inflation shocks,” said Schnabel. In addition, the economy in the euro zone proves to be resistant and it does not see any risk in the medium term that inflation will last two percent in the medium term.
“Another interest rate reduction would only make sense if we would see signs of a significant deviation of inflation from our target value in the medium term. And at the moment I don’t see any signs.”
Uncertainty about customs dispute between the EU and the USA
Schnabel is the most high-ranking German representative at the central bank as part of the six-member ECB directorate around President Christine Lagarde. With their statements, the signals for an interest break are condensed. Many economists also expect the ECB to no longer reduce the key interest rates – not least because the consequences of the customs dispute with the USA are confusing for economy and inflation.
“Tillers have a dampening of the economy at short notice,” warned Schnabel. Inflation can also increase in the medium term. She also warned of “cost shocks that affect the global value chains”, and of supply chain interruptions.
Falling interest rates meet savers
The ECB has reduced the key interest rates in June for the eighth time since summer 2024. The deposit rate for banks and savers is currently 2.0 percent. Inflation in the euro area has a clear degree: In June, the inflation was 2.0 percent according to the statistics office Eurostat. With falling interest rates, loans become cheaper, which supports the economy. Savers, on the other hand, have to cope with the bank with lower interest rates.
dpa
Source: Stern
