ECB leaves the policy interest rate in the euro area unchanged – after ten rate increases in a row, Israel continues the ground offensive – the night update without photos

Inflation in the eurozone is declining, but concerns about the economy are increasing. The euro watchdogs will not increase interest rates any further for the time being.

After ten interest rate increases in a row, the euro watchdogs are leaving interest rates unchanged for the time being. The policy interest rate will remain at 4.5 percent, as the European Central Bank announced after an external meeting of the ECB Council in Athens.

Many economists had expected that the central bank would not initially raise interest rates further. Inflation in the euro area had recently fallen. At the same time, concerns about the economy are increasing.

“Based on its current assessment, the Governing Council of the ECB is of the opinion that the key ECB interest rates are at a level that, if maintained for a sufficient period, will contribute significantly to this objective,” the ECB said.

In the medium term, the target is an inflation rate of 2.0 percent

Last year inflation sometimes reached double digits as a result of Russia’s war of aggression against Ukraine. Since July 2022, the ECB has been countering this development with an unprecedented series of interest rate increases.

Higher interest rates make loans more expensive, which can slow demand and counteract high inflation. More expensive loans also burden the economy, as loan-financed investments become more expensive.

The ECB aims for stable prices in the medium term with an inflation rate of 2.0 percent. Inflation in the single currency area weakened significantly in September. Annual inflation fell to 4.3 percent from 5.2 percent in August.

The economic prospects were clouded

At the same time, the economic prospects for the euro area have deteriorated. The ECB recently expected an increase in gross domestic product of 0.7 percent this year. An increase of 0.9 percent was predicted in July.

According to estimates by the federal government and many economists, Europe’s largest economy, Germany, will even shrink slightly this year.

According to the ECB Council’s latest decision, the key interest rate at which banks can obtain fresh money from the central bank remains 4.5 percent. The deposit interest that banks receive for parked funds remains at 4.0 percent. This is the highest level since the establishment of the Monetary Union in 1999. (awp/sda/dpa)