Interest rate decision in the euro area: ECB leaves key interest rate in the euro area unchanged

2024-04-11 12:20:47

ECB leaves key interest rate in the euro area unchanged

Following a decision by the ECB Council, the key interest rate remains at 4.5 percent, as the central bank in Frankfurt announced on Thursday.

Published today at 2:20 p.m

The key interest rate remains unchanged for the time being: the headquarters of the European Central Bank (ECB) in Frankfurt am Main.

Photo: Keystone

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The European Central Bank is leaving key interest rates in the euro area unchanged for the fifth time in a row despite falling inflation. The interest rate at which banks can obtain fresh money from the central bank remains at 4.5 percent.

The ECB Council decided this on Thursday. The deposit interest that banks receive for parked funds remains unchanged at 4.0 percent. Economists generally expect an interest rate cut longed for by business and private borrowers in June.

The recent development of the inflation rate makes the monetary authorities more confident, but “not sufficiently confident,” ECB President Christine Lagarde said at the beginning of March. “We clearly need more evidence and more data. We’ll know a little more in April. We’ll know a lot more in June.” In June, the ECB experts will present new economic and inflation forecasts.

In order to get inflation under control, which has risen to record levels following Russia’s war of aggression on Ukraine, the ECB has raised interest rates ten times in a row since July 2022. This makes loans more expensive. This can slow down demand and counteract high inflation rates. More expensive financing is at the same time a burden for the economy and private individuals who want to borrow money.

Economy is weakening

Inflation in the euro area recently weakened more than expected. According to an initial estimate, consumer prices rose by 2.4 percent in March compared to the same month last year. Economists had expected 2.5 percent. Inflation was 2.6 percent in February and 2.8 percent in January. In March 2023, inflation was still 6.9 percent.

The price development is thus approaching the ECB’s goal of an annual inflation rate of two percent in the medium term. At this value, the monetary authorities see price stability guaranteed. Higher inflation rates reduce the purchasing power of consumers. You can then afford one euro less.

A rapid decline in inflation could open up scope for interest rate cuts. This is also supported by the fact that the economic prospects in the euro area have deteriorated. The ECB recently expected only 0.6 percent growth this year. In December, 0.8 percent was predicted.