ECB Holds Interest Rates Pending Recovery

The European Central Bank (ECB) has held interest rates pending the Eurozone’s economic recovery actually starting.

The ECB’s main deposit rate stays at a negative -0.5% pa and the ECB has confirmed it will continue to adjust all its financial instruments to reflect the same.

What is the affect of negatibe rates?

It means that European 'high street' and 'investment' banks that leave their money with the ECB are actually charged to do so.

Licence to print money

The ECB has flooded markets with cheap i.e. free cash through the pandemic emergency purchase programme (PEPP) during Covid and remain at £1.23 billion (€1.35 billion).

Comment

Sooner or later we will conquer coronavirus.  All the money that has flooded into not just Europe, but UK, US and globally means global inflation is on its way. 

We also believe that by design, governments want inflation because it will devalue government borrowing without every repaying it.  Countries cannot afford to pay their debts.  If we have compounded inflation of just 5% pa over a 10 year period, that's 63%.  This means that if the governments create an environment for inflation, their borrowing (including pandemic borrowing) would be devalued by 63% over 10 years without every repaying it.