European Central Bank Cautious On Recession
Published / Last Updated on 10/03/2022
The European Central Bank ECB has stated that we are at a ‘watershed’ moment in history on the invasion of Ukraine and is now cautious on risks of EU recession.
The ECB has held central bank interest rates yet again as follows:
- Main refinancing operations at 0.00% pa
- Marginal lending facility at 0.25% pa
- Deposit interest rate (the main interbank lending rate) at -0.50% pa.
In addition, the ECB is increasing the rate of slowdown for economic stimulus via its quantitative easing programme to €40 billion in April, €30 billion in May and €20 billion in June. This is a significant slowdown but no doubt subject to change as the situation in Ukraine unfolds.
Comment
Make no mistake, inflation is here to stay for a sustained period and the EU trend target of 2% pa, similar to the UK and USA’s of 2.5% pa is unlikely to be achieved without interest rate increases. That said, economic sanctions and reliance on Russian oil and gas will likely drag Europe into recession hence the caution with no interest rate increases.