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The European Central Bank in Frankfurt am Main
Photo: Christian Offenberg / imago images
Despite the relaxation of the corona pandemic and rising inflation rates, the key interest rate in the euro area remains at a record low of zero percent.
This has been decided by the Council of the European Central Bank (ECB).
The key interest rate has been at this level since March 2016.
The deposit rate remains at minus 0.5 percent.
Money houses must therefore continue to pay penalty interest if they hoard excess funds at the central bank.
The central bank also announced that the purchases as part of the trillion dollar crisis bond purchase program PEPP should continue to be significantly more extensive than at the beginning of the year.
The program launched in spring 2020 has already been topped up twice.
It has a purchase limit of 1.85 trillion euros and purchases are expected to continue until the end of March 2022.
The monetary authorities around President Christine Lagarde want to avoid tightening the financing conditions for companies, states and private households.
Because that could jeopardize the recovery of the economy from the consequences of the pandemic.
The ECB purchase program helps states and companies alike: They do not have to offer such high interest rates for their securities if a central bank is a big buyer in the market.
This is particularly important for states because during the corona crisis they launched rescue programs worth billions that need to be financed.
Governing Council member Klaas Knot started a debate in April about a slowdown in purchases.
In his view, with a robust recovery from the third quarter onwards, the central bank could slowly start scaling down PEPP purchases and then end them as planned in March 2022.
The debate comes "too early and is premature," said Lagarde after the interest rate decision in Frankfurt.
Such long-term questions would arise in due course.
Improved forecast despite rising inflation
Inflation in the euro area has been picking up for a few months. Fueled above all by rising energy prices, the annual rate of inflation climbed to 2.0 percent in May. It was thus slightly above the central bank's target. However, Europe's monetary authorities regard the surge in inflation as temporary. Among other things, it was a consequence of the drop in prices in the first corona wave a good year ago. Permanently low prices are seen as a risk to the economy: companies and consumers could then postpone investments in the hope that it will soon become even cheaper.
Europe's monetary authorities have been in anti-crisis mode for years.
The central bank's other bond purchase programs, which have been running since March 2015, with the aim of boosting inflation, had already reached a huge volume of more than 3.1 trillion euros at the end of May.
However, according to the ECB, the prospects for economic growth in the euro area have improved significantly in view of falling corona infection rates and the global economic recovery.
The central bank is now assuming an increase in gross domestic product (GDP) of 4.6 percent for this year.
In March, the monetary authorities had forecast growth of 4.0 percent.
nek / dpa / reuters