ECB sticks with zero interest: the right move in the crisis?
The European Central Bank will hold to its course, leaving key interest rates at a record low of zero percent. The ECB is accelerating its controversial multi-billion euro bond-buying scheme for bonds from Eurozone countries and companies.
Raising interest rates would be fatal
The ECB has no other choice, explains Aamulehti:
“Interest rate hikes would kill people's desire to consume, which in turn would weaken companies and the labour market. In addition, most countries are up to their ears in debt. Raising interest rates would torpedo any chance of reducing budget deficits. Now we can only hope that the Covid vaccinations will advance quickly so that society can be reopened. Low interest rates will help kick-start the economy.”
Worth the cost
The Frankfurter Rundschau agrees with the ECB's course:
“It is enormously important that the Central Bank is now once again throwing itself into the fray to 'ensure favourable financing conditions', as director Christine Lagarde put it. Interest rates are to be pushed down to an extremely low level in the coming months - which will give governments leeway for additional aid programmes that need to be financed with government bonds. The price to be paid for this could be a temporarily slightly higher inflation rate. That is quite bearable.”
The ECB is sticking to its failed monetary policy, the Neue Zürcher Zeitung criticises:
“Once again, the ECB is completely overreacting under pressure from the financial markets, because even according to its own calculations the increase in inflation will only be temporary. ... Instead, those in charge at the ECB should be happy that so far interest rates have only increased slightly. This is also an expression of the fact that a significant economic recovery is expected on the capital markets for the summer. ... As a result [the ECB] will never be able to extract itself from its ultra-expansionary monetary policy. This will prolong the nightmare for those who have savings, while the finance ministers will be able to rejoice: the ECB will remain their patron saint.”