ECB decides to pause interest rates despite economic concerns: financial experts analyze the effects.

ECB decides to pause interest rates despite economic concerns: financial experts analyze the effects.

According to a report by www.n-tv.de, the European Central Bank (ECB) has decided to keep the key interest rate constant for the third time in a row. This decision comes despite the downward trend in inflation in the euro area and the weakening economy.

The key interest rate was left at 4.50 percent, while the deposit rate remained at 4.00 percent. The ECB had increased interest rates ten times since summer 2022, but is now at an interest rate plateau due to significantly reduced inflation. ECB President Christine Lagarde emphasized that it was still too early to declare victory over inflation and that a turnaround in interest rates was not currently an issue. Despite strong speculation about rapid interest rate cuts, these are currently being ruled out.

The decision to keep the key interest rate constant is also influenced by the weak phase of the economy in the euro area. According to the President of the IFO Institute, Clemens Fuest, Germany is even stuck in a recession. However, the ECB wants to avoid completely strangling the economy, which is why it is currently avoiding cutting interest rates.

How could this decision affect the market and the financial industry? A possible impact could be that the euro area economy will be permanently weakened if interest rates are not reduced, which could have a negative impact on investments and loans. The likelihood of a first move lower in April was estimated at over 60 percent before the decision, showing that markets were hoping for a rate cut.

Overall, however, it remains to be seen how the economy in the euro area and inflation will develop over time, as these factors are crucial for future monetary policy decisions by the ECB.