Month: June 2019

The Current ECB Interest Rate Policy

In difficult waters: Interest rate and inflation policy of the European Central Bank the European Central Bank is not only the monitoring of banking, but has also the task to regulate the money supply in the euro area. Setting a uniform interest rate by the ECB (currently 1.00 percent) has a decisive influence on inflation in the single currency countries. The independence of the ECB from political influences on the part of individual States is particularly important. While Governments often understand the own national interests as the top priority, the Supreme commandment of the ECB’s price stability. In the recent past repeatedly violent conflicts of interest were in the media.

This, especially the French Government tried to exert influence on the ECB chief in the form of lower interest rates to stimulate the domestic labor market and to curb the national debt. A lower interest rate promises stimulating the economy often through credit cheapening, with time but can be rapid inflation upwards. This explains forecast – detailed such as for 2012 to 2.4 percent so far over the two percent that pretends the ECB as an upper limit. Inflation is and remains an ongoing issue the greatest fear of the Germans a rampant inflation, historically traceable, categorically exclude the reigning since the November 2011 ECB Chief, Italian Mario Draghi, 64. Read additional details here: Professor Roy Taylor. This is currently in the call, indirectly to stir up inflation by increasing the money supply in the euro area.

To reassure the Germans in particular, he relies on Prussian virtues, especially on the economy. In fact, European banks received loans amounting to one trillion euros to very low interest rates, which could lead to a “credit crunch” and fuelling inflation, because the balance in the individual Member States can be done only through an increase in the money supply. Draghi, however, refers to the possibility that at any time demand the return of loans to the banks to can.