Monetary policy
ECB decides on key interest – break expected
Good for debtors, bad for savers: Eight times the European Central Bank has reduced interest since last June. Now a lot speaks for a break. German central bankers in particular penetrate it.
The European Central Bank (ECB) will decide on the key interest rates in the euro area this Thursday (2:15 p.m.). After eight interest reductions since last summer, many economists are now expecting a break. Because with the series, the ECB got the rapid inflation of the past few years under control. In addition, the consequences of the customs dispute with the USA are confusing for the economy and inflation.
Most recently, the ECB had now reduced the deposit rate relevant to savers and banks in June for the seventh time in a row to 2.0 percent. Lower interest rates support the economy in the euro area because loans become cheaper for companies and consumers. Savers, on the other hand, have to be satisfied with lower interest rates at the bank.
German central bankers on the brake
ECB director Isabel Schnabel recently subdued the expectations and emphasized that the bar was “very high” for further interest reduction. Bundesbank President Joachim Nagel also advocates waiting. Other central bankers, such as from France, expressed concern that inflation could fall under the ECB target of 2.0 percent due to the weak economy in the euro area, the US tariff and the strong euro.
The main goal of the ECB is stable prices. In June, inflation in the euro area was 2.0 percent according to the Statistics Office Eurostat and thus exactly at the finish of the ECB.
The higher the inflation, the lower the purchasing power of the people. But also permanently falling prices want to avoid central banks: Then companies and consumers could put investments in the hope of even cheaper prices – that would slow down the economy.
dpa
Source: Stern
