The European Central Bank (ECB) decided today to cut the interest rate on the deposit facility by 25 basis points to 2.50%. The main refinancing rate was adjusted to 2.65% and the marginal lending rate to 2,90%.
Florian Heider, Scientific Director of the Leibniz Institute for Financial Market Research SAFE, comments:
“Once again, the European Central Bank is cutting interest rates. At this level, it is questionable whether monetary policy remains restrictive. After six consecutive rate cuts, a pause might be appropriate to assess whether the balance between low inflation and potential economic growth has been achieved.
This is because the central problem of the European economy at the moment is not that interest rates are still too high, but is of a structural nature. With current inflation and the new interest rate level, the real interest rate is at a very low level. This suggests that monetary policy is no longer clearly restrictive. While inflation has eased to 2.4%, it remains unevenly distributed. A pause would also allow the ECB to carefully analyze the consequences of the rapidly changing geopolitical situation and its impact on financial markets.”
Scientific Contact
Prof. Dr. Florian Heider
Scientific Director, Co-Director Department "Financial Intermediation"
