Image: KIRILL KUDRYAVTSEV (AFP)
The monetary authorities around central bank chief Christine Lagarde decided on Thursday at their interest rate meeting in Athens not to affect the key interest rates. The key deposit rate on the financial market, which financial institutions receive from the central bank for parking excess funds, remains at the record level of 4.00 and the key interest rate is 4.50 percent.
“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,” said the euro watchdog. When determining the appropriate level and duration of the restrictive level, the Governing Council will continue to pursue a “data-driven approach”. This means that the Euro Central Bank has now probably reached the interest rate peak for the time being on the tightening course it initiated in the summer of 2022. Inflation in the 20-country community has recently fallen significantly. In September it fell to 4.3 percent from 5.2 percent in August. As recently as autumn 2022, the rate was at times over ten percent. However, inflation is still more than twice as high as the Euro Central Bank’s target of two percent.
The weakened economy in the euro area may also have played an important role in the ECB’s decision. According to a survey, the economy had recently accelerated its decline. The purchasing managers’ index for the private sector – industry and the service sector together – fell by 0.7 points to 46.5 points in October. This is the lowest level in around three years. In addition, according to the Bundesbank, the economy in Germany is likely to have shrunk in the summer quarter. If economic output declines again in the current fourth quarter, it will be referred to as a “technical recession”.
more from economics
