Many borrowers with a variable interest rate can breathe a sigh of relief: in the current interest rate decision, the European Central Bank (ECB) has decided not to increase the policy rate. So it remains at 4.5 percent. Inflation in Europe could now fall more sharply than initially expected.
The pressure on loans remains high, but in any case will not increase further. For the second time in a row, the policy interest rate will remain unchanged, the ECB announced on Thursday.
Currency watchdogs keep their feet still
The main interest rate at which banks can obtain fresh money from the central bank will remain at 4.5 percent following a decision by the ECB council, as the monetary authorities announced in Frankfurt on Thursday.
According to the most recent decision of the ECB Council, the deposit interest rate that banks receive for parked funds remains at four percent. This is the highest level since the establishment of Monetary Union in 1999.
Inflation is moving in the right direction
Inflation in the single currency area has surprisingly weakened significantly recently. At the same time, concerns about the economy are increasing. The US Federal Reserve (Fed) had previously left the key interest rate in the US unchanged for the third time in a row and promised interest rate cuts for the coming year.
Help for domestic borrowers?
Meanwhile, there are signs of relief for Austrian borrowers. On Wednesday, the ÖVP was fundamentally open to a proposal from the Greens. How exactly you could help people with variable interest rates is still up for debate.
Likely a faster decline in inflation
One reason for suspending a possible interest rate increase is the positive development of inflation in the eurozone. According to the ECB’s assessment, interest rates are likely to fall faster than expected three months ago. At the same time, the economic outlook has become bleaker, as evidenced by the central bank’s forecast published on Thursday.
She now expects inflation of 5.4 percent this year. In its September forecast, the ECB assumed 5.6 percent. The central bank predicts a weaker inflation rate of 2.7 percent for 2024. An unchanged rate of 2.1 percent is expected in 2025. This brings us considerably closer to a target value of two percent.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
