Today, the European Central Bank (ECB) decided to leave its key interest rate unchanged. The deposit rate thus remains at 2.00%. The main refinancing rate is 2.15%, and the marginal lending rate is 2.40%.
Florian Heider, Scientific Director of the Leibniz Institute for Financial Research SAFE, comments:
“The ECB left interest rates unchanged today. The interest rate pause is a logical decision; inflation in the euro area was precisely on target at 2.0 percent in June. Price stability is the ECB's mandate, and it is currently being fulfilled.
The situation remains uncertain. Geopolitical tensions, the trade conflict with the US, and a strong euro make it difficult to predict future price changes. In this environment, patience and caution are the best strategy to maintain room for maneuver in the future.
At the same time, the effects of previous interest rate cuts are not yet fully visible. A further step would have little additional effect but would limit monetary policy flexibility. The ECB is right to wait and see at this point in time. Its symmetric inflation target allows for temporary downward deviations.
Now it is important to pursue a predictable course and not raise expectations that will have to be revised later. Clear communication remains crucial in this regard.“
Scientific Contact
Prof. Dr. Florian Heider
Scientific Director, Co-Director Department "Financial Intermediation"
