Due to the interest rate decision of the European Central Bank, ordinary banks such as ABN AMRO and ING receive more interest if they store money in the central bank. The regulator hopes that banks will then also raise interest rates for their customers, for example for savers. This makes saving more attractive, so that consumers buy less, is the idea. If there is less demand for the products, the prices go down.
The European Central Bank is not the only central bank that has raised interest rates. Earlier on Thursday, the Bank of England did the same, while the US Federal Reserve also raised interest rates.
Simultaneously with the interest rate hike, the European Central Bank has announced that it will start phasing out bonds that the central bank has purchased in recent years starting next year. The European Central Bank bought about 5 trillion euros in bonds from various member states. This was supposed to stimulate the European economy. Now that the ECB no longer considers this necessary, the bank wants to slowly get rid of it.
The central bank wants to do this by gradually shrinking its portfolio. The European Central Bank will start this in March next year, taking steps of 15 billion euros per month. At the end of the second quarter, the ECB will reassess the rate at which the central bank will reduce its bond holdings.
We are interested in your opinion on this article. Click here To leave your feedback in a short one-minute survey.
