At its meeting today, the Governing Council of the ECB again decided not to change the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility. Florian Heider, Scientific Director of the Leibniz Institute for Financial Research SAFE, comments on this decision:
“What is striking about today’s decision is not so much that the ECB is maintaining the current level of key interest rates in the eurozone. This decision was already a foregone conclusion for the markets. Instead, the central bank is refusing to be driven by current market expectations on future rate decisions: the ECB is actively stepping on the brakes as it grapples with the consequences of economic shocks that create uncertainty.
While there is already considerable speculation about a mid-year turnaround in the ECB’s interest rate policy, the war in Ukraine and the Middle East continues, inflation rates in the eurozone are diverging sharply, and the German economy is weakening as the driving force of the European Economic Area. In addition, high-interest rates dampen demand for credit from European banks, both corporate and household, and the banks are tightening their lending standards. On top of that, wage-price spirals are still possible. These are, therefore, highly unfavorable conditions for the ECB to achieve its two percent target.”
Scientific Contact
Prof. Dr. Florian Heider
Scientific Director
