The key rate in the Euro area and remains unchanged at zero percent. The Council of the European Central Bank (ECB) decided. Banks can borrow, therefore, continue to give money to the record low interest rates. It will remain the ECB, also until “at least through the summer”.
in view of the increasing economic risks, economists expect that the ECB will only increase in the year 2020, the key interest rate. Among other things, the trade conflict between China and the United States impacted world trade. The Chinese economic growth last year fell to the lowest level in almost ten years. In addition to threaten in Europe by a possible disorderly Britain to leave the EU economic uncertainties.
According to estimates by the ECB President, Mario Draghi, is the growth momentum in the short term is likely to be weaker than initially. “The continuing uncertainty, in particular in relation to geopolitical factors and the threat of protectionism to weigh on the economic climate,” said Draghi. The most recently published data were worse than expected. There is, however, Consensus in the ECB governing Council, that the probability of a recession was low.
Weaker Inflation in the Euro area
In December, the Inflation in the Euro area weakened. The consumer prices according to Eurostat calculations, by 1.6 percent above the level of the previous month. Thus, the inflation rate fell to the lowest level since April. The ECB is aiming for, but in the medium term, an inflation rate of just below 2.0 percent.
Permanently low or even falling prices, could bring businesses and consumers to spend less money and investment delay. This could put the brakes on the economy. With its interest-rate policy, the ECB wants to drive the economy and for a rise in inflation.
ECB completed the bond purchases
The ECB to use in addition, in recent years, and bond purchases to counter low Inflation and weak economic activity. The Central Bank had invested in March 2015, more than 2.6 trillion Euro in the bonds of companies and countries to support the financial markets.
The trillion-heavy program was run out at the end of the year. Bonds maturing from this stock, want to replace the ECB.