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Home Economy

ECB maintains record-low interest rates

Nikola Kiš by Nikola Kiš
11 December 2020
in Economy
European-Central-Bank

Businessman presses button interest rates on virtual screens.

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Brussels (Brussels Morning) The 25-member Governing Council of the European Central Bank (ECB) has decided to maintain record-low interest rates and expand the stimulus program, stressing that the eurozone is facing uncertainty over the coronavirus pandemic, DW reports. 

According to the decision, the benchmark refinancing rate remains at 0% and the deposit rate at negative 0.5%, encouraging banks to lend rather than hold onto money.

The ECB bond-buying programme has been expanded by 500 billion euro, to a total of 1.85 trillion, the aim being to print new money in order to drive down the cost of long-term borrowing and secure enough money for governments, companies and consumers.

The programme was originally intended to end in June next year, but has now been extended to the end of March 2022. The ECB points out that new monetary policy measures will help preserve favourable financing conditions throughout the pandemic. This should support solvency of all sectors of the economy, the ECB notes, while maintaining price stability in the medium term.

ECB warns of uncertainty

The ECB cautions, however, that “uncertainty remains high, including the dynamics of the pandemic and the timing of vaccine roll-outs.” The move by the EU’s central bank comes against the backdrop of the second wave of coronavirus infections in Europe.

It is aimed at helping businesses stay afloat during the pandemic and supporting governments that are borrowing heavily in order to provide aid to workers and businesses. Economies are expected to contract as many governments have imposed severe restrictions in their efforts to curb the spread of coronavirus.

Eurozone GDP is expected to drop in the final quarter of the year because of the negative epidemiological trends. The eurozone boasted economic growth in the third quarter, following a steep decline in the second quarter brought on by the first wave of the pandemic and subsequent lockdowns.

Since the pandemic started, annual growth rates have been negative. While mass vaccinations are expected to start early next year, it could take months before enough people are vaccinated for infection rates to drop and allow authorities to lift restrictions that are preventing economic activity.

Tags: European Central Bank (ECB)Main-Sliderrecord-low interest rates
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