European Central Bank Raises Interest Rates to 0.00%

The European Central Bank (ECB) has increased interest rates for the first time in 11 years by 0.50% pa to now sit at 0.00%, yes, that’s right, absolutely nothing, zero.

Previously Eurozone rates sat in the negative at -0.50% pa.  This mean’t that when European banks did not want hold money and deposited with the ECB they were being charged 0.5% pa or put another way, if banks borrowed from the ECB, they actually got paid 0.5% pa rather than being charged it.  Negative rates had been in place since 2014.

Lend it Don’t Stash it

All this was to encourage banks to lend money to consumers and businesses to stimulate the EU economy rather than keep hold of money and depist it with the ECB.

Inflation Woes

Europe is plagued by inflation in the same way that both the UK and the USA is.  The EU’s inflation target is 2% pa but consumer prices inflation in the EU was at 8.6% pa in June, with the same pressures on food, fuel and energy price increases. The interest rate rise is allegedly to curb inflation but you know our thoughts on inflation.  Governments need continuous higher inflation to devalue huge covid-19 debts that will have to be repaid in few years time.