Today, the European Central Bank (ECB) decided to cut the interest rates deposit facility by 25 basis points each. Because of the change in the size of the corridor as of September 18th, the deposit facility rate will be decreased to 3.50%. The interest rates on the main refinancing operations and the marginal lending facility will be decreased to 3.65% and 3.90% respectively. The decision follows significant declines in inflation in the eurozone and indicators of an upcoming interest rate cut by the US Federal Reserve (Fed). Florian Heider, Scientific Director of the Leibniz Institute for Financial Research SAFE, comments:
“The ECB is doing the right thing by lowering the interest rates. In view of the sharp fall in inflation, this step is appropriate to further support economic growth. Even though the economic systems are very different, the expected interest rate cut in the US is influencing this decision.
At the same time, it is important to keep an eye on the ECB’s primary objective – price stability with core inflation of two percent. The ECB must remain flexible and consider the economic differences in the eurozone. The scope for further interest rate cuts is limited at the present time and should only be used if economic data reliably indicates this.”
Scientific Contact
Prof. Dr. Florian Heider
Scientific Director, Director Department "Financial Intermediation"
