ECB continues to hold on to current interest rates for the fourth time in a row | Economy

The ECB’s key interest rates remain unprecedentedly high. The refinancing interest rate, which banks pay when they borrow money from the ECB for a week, stands at 4.50 percent. The deposit interest rate at which banks can park money at the ECB is 4 percent. Banks pay 4.75 percent interest on one-day loans (marginal lending facility).

Since July 2022, the central bank decided to combat sky-high inflation with ever higher interest rates. Before that, the deposit rate and the refinancing rate were as high as -0.5 and 0 respectively. After ten increases in a row, the governors decided for the first time at the end of October to keep interest rates unchanged.

The main question now is when the ECB will start cutting interest rates again. Chairman Christine Lagarde has emphasized several times in recent months that it was still too early to talk about this.

In the meantime, the ECB is adjusting its inflation outlook downwards. While she previously assumed inflation of 2.7 percent in 2024, she now expects 2.4 percent.

“Although most indicators of underlying inflation have fallen further, price pressure within the euro zone remains high, partly due to strong wage growth,” the central bank warns when explaining the interest rate decision. She emphasizes that the current high interest rates help to suppress inflation and push it towards its target of 2 percent in the medium term.

The ECB also lowered its expectations for economic growth. In the euro zone, this would amount to 0.6 percent in 2024. Previously, the institution had targeted 0.8 percent.