Monetary policy
Bundesbank President: ECB can take time for interest
Good for borrowers, bad for savers: The European Central Bank has recently reduced the key interest rates for the eighth time since June 2024. Now there is an interest break.
According to the latest interest rate of the European Central Bank (ECB), Bundesbank President Joachim Nagel advocates waiting. The past interest rate of the ECB was “appropriate”, Nagel told Deutschlandfunk. You have now arrived in the neutral area. Now you can take your time and look at the situation first. “We now have the maximum flexibility at this interest level.”
A neutral level means that the key interest rates neither brake nor push the economy. The signals for a break from the ECB, which has reduced the key interest rates for the eighth time since June 2024 on Thursday. The deposit rate for banks and savers was reduced by 0.25 percentage points to 2.0 percent. With falling interest rates, loans become cheaper, which supports the weak economy in the euro area. Savers, on the other hand, have to adapt to falling overnight money and fixed deposit interest.
Uncertain location in the customs dispute with Trump
Many economists expect a break from the ECB at the next interest session in July – not least because the consequences of the customs dispute with the USA are confusing for economy and inflation.
Inflation in the euro area has recently decreased significantly, so an argument for higher interest rates. However, consumers feel the increased prices in everyday life. In May, according to an initial estimate by the Eurostat statistics office, the inflation rate fell to 1.9 percent and thus under the ECB target mark. The central bank is aiming for a rate of 2.0 percent for the currency area in the medium term.
dpa
Source: Stern
