After a long hesitation, which was too long for many, ECB boss Christine Lagarde heralded the turn in interest rates in Europe: in July the key rate will be increased from zero to 0.25%, the first increase in 11 years!
Net purchases of corporate and government bonds also expire in July. An interest rate hike will then follow in September, probably also by 0.25%. The reason for the change of heart was galloping inflation in the EU, which is higher and more persistent than Lagarde had previously believed.
“According to the new forecast, inflation will remain high for 2-3 years. The 0.25% is therefore very, very hesitant,” criticizes Heike Lehner, an expert at Agenda Austria. By comparison, the US Federal Reserve has already implemented several hikes and now keeps the interest rate at a maximum of 1%. In addition, the ECB is looking at how it can continue to buy government bonds from highly indebted countries, if necessary, so that they do not go bankrupt, Lehner said.
Loans become more expensive as a result of the interest rate rise, but for savers the decrease in fair value remains virtually unchanged. European stock prices fell after the ECB statement.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
