The European Central Bank keeps its key interest rate at 4.5 percent

The European Central Bank kept its key interest rate at 4.5 percent. The ECB Council decided this at its first meeting of the new year on Thursday in Frankfurt.

Despite growing economic concerns, euro currency watchdogs have not given in to calls to lower interest rates for the time being. Eurozone banks can access new money from the European Central Bank (ECB) at its key interest rate.

The key interest rate is at a high level

According to the decision of the European Central Bank Council on Thursday, the interest rate on deposits received by banks for parked funds remains at 4.0 percent. This is the highest level since the establishment of the monetary union in 1999.

In July 2022, the European Central Bank ended the years of zero and negative interest rates in order to control high inflation. The central bank raised interest rates ten times in a row.

Higher interest rates make loans more expensive, which can slow demand and counteract higher inflation rates. However, more expensive loans also put a burden on the economy because investments financed by loans become more expensive.

The fact that inflation has been trending down recently gives monetary authorities room to ease monetary policy again. The weak economy in the euro zone and in Germany, Europe's largest economy, could benefit from interest rate cuts.