ECB: key interest rate left at zero percent

Despite rising inflation, the European Central Bank is leaving the key interest rate at zero percent. ECB chief Lagarde is convinced that the current inflation trend is temporary and driven by high energy prices, among other things. The ECB will also decide in December whether to stop its multi-billion bond-buying programme. How long can it maintain its accomodative monetary policy?

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Cicero (DE) /

Increasingly in need of explanation

The ECB is breaking its own rules, criticises Cicero:

“The 'primary objective' of the European Central Bank system is to 'maintain price stability'. This is written in black and white in the ECB statute ... . If inflation rates in the Eurozone remain high or even continue to rise, the ECB will come under growing pressure to explain itself. For it is not only in Germany, where the fear of demonetisation is great for historical reasons, that public discontent is growing, and political pressure along with it - especially as it is becoming increasingly obvious that the ECB has long felt committed to a different 'primary objective': not price stability, but the stabilisation of over-indebted euro states.”

Die Presse (AT) /

Between a rock and a hard place

The central banks of the Eurozone face a difficult decision in the long term, explains Die Presse:

“They may now have to decide whether to let inflation gallop away or risk a huge sovereign debt crisis in countries like Italy and Spain. It's a classic choice between a rock and a hard place. ... Zero interest rates and massive bond purchases have, after all, completely ironed out the valuation differences between debtors with good and bad credit ratings. The government bond rate no longer reflects the bond risk of individual borrowers. If this massive central bank intervention is ended, market interest rates will return sooner or later. ... If the central bank is faced with the choice of saving government finances or citizens' assets, it will probably choose the former.”