ECB leaves key interest rate unchanged despite inflation and Ukraine war

DThe European Central Bank (ECB) leaves the base rate unchanged. While it has now stopped buying new PEPP crisis program bonds, new bonds from the old APP bond purchase program will be purchased until the summer, provided nothing unforeseen happens.

“Some time” after the end of bond purchases, however, interest rates will rise. The Governing Council announced it on Thursday after its April meeting. The president of the ECB, Christine Lagarde, wants to explain the details in a press conference.

The statement said: “At today’s meeting, the Governing Council considered that data received since its last meeting reinforces its expectation that net asset purchases under its asset purchase program should be completed in the third quarter. “. on incoming data and the evolution of the assessment of the outlook by the Governing Council: “Under the current conditions of high uncertainty, the Governing Council will consider optionality in the conduct of monetary policy, gradualism and flexibility. The Governing Council will take all necessary measures to fulfill the ECB’s mandate to maintain price stability and help safeguard financial stability.”

Jörg Krämer, Chief Economist at Commerzbank, commented: “Unfortunately, despite an inflation rate of 7.5 percent, the ECB has not decided today to end its net bond purchases and negative interest rates earlier.” The ECB is in its very loose monetary policy, the more people’s inflation expectations rise and very high inflation becomes permanent.”

Public pressure on the ECB is great

Unlike the US Federal Reserve (Fed), which raised its key interest rate by 0.25 percentage points, the ECB leaves its main refinancing rate at 0 percent despite all the political pressure, the banking industry and the public and also maintains a negative interest rate. rates for banks. However, it offers the prospect of a change and normalization of monetary policy.

Economics professor Lars Feld had suggested that the central bank could now announce an end to negative interest rates by September. Deutsche Bank boss Christian Sewing had said he expected interest rates to rise “in the third quarter, or at the latest in the fourth quarter.”

Record inflation and at the same time a lot of uncertainty

Inflation in the euro area has risen to exceptionally high levels, and has not turned out to be as transitory as central bank experts had initially expected. “Inflation rates are indeed higher than expected and will last longer than originally thought,” said ECB Chief Economist Philip Lane of the FAZ currency union. Not only have heating oil and gasoline become extraordinarily expensive, food prices have also risen sharply. In Germany, for example, butter has recently increased in price by 17.6%, bread by 7.1% and vegetable oil by 30%. Even the so-called core inflation rate, which is inflation without highly fluctuating prices like energy and food prices, to which monetary policy pays more attention, has reached 3 percent in the euro area. The ECB is aiming for an inflation rate of 2 percent in the medium term.


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