ECB’s key deposit rate seen stable at 4% until July 2024

The ECB’s key deposit rate will remain stable at its current level of 4% until July 2024, as the central bank is expected to halt the most aggressive series of interest rate rises, sources said in exclusive statements to “Naftemporiki.”

At the meeting held in Athens, it has already been discounted that the ECB will pause the interest rate increases, giving a breather to economies under pressure from high borrowing costs, geopolitical tensions and large debts.

Bank of Greece (BoG) governor, Yannis Stournaras, is expected to keep a moderate stance, at a time when the eurozone economy is headed for recession or is faced with stagnation and inflation which is at 4.3%, more than double the target.

Business activity – manufacturing sector and services – recorded a drop to the lowest level in three years, suggesting that the eurozone economy is already in recession. Third-quarter GDP data will be released next week and is likely to show a 0.1% contraction, analysts said, possibly extending into the fourth quarter.

Under these conditions and given that the 10 interest rate hikes that have taken place so far have not been fully passed on to the economy of the euro member states, the next period is set to be much more difficult and uncertain, especially in light of the new geopolitical crisis in the Middle East, which is a volatile factor and could bring a new wave of inflation.

The issue is that interest rates will remain at their current high levels for many more months, keeping financial conditions tight, with the ECB starting to consider cutting interest rates after July. All eyes are turned on ECB chief Christine Lagarde’s speech after today’s announcement hoping that it will give some evidence about the ECB’s next moves.

Many argue that Lagarde will keep a balance and will try to avoid sounding too aggressive while at the same time leaving the door open for another rate hike if needed.

Πηγή: https://www.naftemporiki.gr/english/1529607/ecbs-key-deposit-rate-seen-stable-at-4-until-july-2024-2/