The ECB is keeping the key interest rate unchanged. For savers, this means continued low interest rates, and there is hardly any relief in sight for loans and building financing.
As expected, the European Central Bank (ECB) left the key interest rate in the euro area unchanged at two percent on Wednesday. This concerns the deposit interest rate, which serves as a guideline for banks and thus for loans and savings products.
The decision once again signals continuity: the inflation rate fell noticeably in January from 2.3 to 1.7 percent. From the ECB’s perspective, however, this is not a reliable trend so far, but rather a snapshot. In order to change monetary policy course, the monetary authorities require sustained low inflation for several months – especially in terms of core inflation.
Why the ECB is sticking to the “pause course”.
Several factors currently speak against adjusting the key interest rate:
- Inflation relatively stable, recently declining: Inflation remains close to the 2 percent mark.
- Weak economy: Economic dynamics in the euro area remain moderate. In this environment, aggressive tightening – typically used to cool demand – would not be justified.
- Political pressure from euro countries with high debts: Countries with growing deficits and rising financing costs, especially France and Spain, would be particularly hard hit by an interest rate increase. This further limits the ECB’s policy leeway.
At the same time, the external environment plays a role: The US Federal Reserve Bank has not changed its interest rates recently either. This takes pressure off the ECB: If it were to decouple interest rates more closely from the USA, the euro could rise significantly against the dollar.
In principle, a stronger euro is not a problem. However, in a phase of weak economic development and falling inflation, it would further depress prices and make it more difficult for European companies to sell their products abroad, thus further slowing the economy. This is exactly what the ECB wants to avoid.
Warsh, former Fed Governor (2006 to 2011), brings experience from previous financial crises and many years in the financial industry and politics. On the one hand, analysts see him as a qualified central banker, but on the other hand his role is caught between political pressure and institutional independence.
Markets and economists are particularly concerned with the question of whether he will continue Powell’s course or push harder for interest rate cuts.
Impact on Europe
If the US Federal Reserve lowers interest rates more quickly under a new chairman like Kevin Warsh, the interest rate difference between the US and the euro area would narrow. US investments would then be less attractive for international investors. Capital could flow more to Europe and the euro would tend to become stronger and the dollar weaker.
This would have noticeable consequences for consumers: a stronger euro makes travel, online purchases and imports from abroad, such as electronics or energy, cheaper. At the same time, European export companies are coming under pressure because their products are becoming more expensive outside Europe. This can slow down growth and employment – a risk in an already weak economic phase.
Conversely, significantly higher US interest rates would actually support the dollar because they attract capital. However, this effect is currently being overshadowed by political uncertainty in the USA, which is why the dollar remains weak despite the interest rate advantage. For Europe this means: The euro is already high and the central bank wants to avoid additional appreciation by the ECB.
Many banks – especially savings banks and cooperative banks – pay up daily allowance still hardly any interest. National institutes and online banks sometimes offer significantly higher conditions for new customers, but these are usually limited.
Since the ECB has not announced any interest rate cuts for the time being, an abrupt drop in interest rates is not to be expected in the short term. At the same time, however, there are no clear signals for noticeably higher interest rates. Anyone who finds a better offer today can switch relatively worry-free. It’s hardly worth waiting.
At Fixed deposit the image remains similarly stable. Interest rates have settled at a moderate level; major upward swings are unlikely without renewed monetary policy tightening. For savers who are looking for planning security, it can make sense to secure the current conditions for one or two years.
For borrower The break course also does not mean relief at the push of a button. Installment loans will remain at the current level, and no major interest rate reductions are expected in the short term. Anyone who has previously postponed purchases in the hope of getting significantly cheaper loans will probably have to wait.
At Construction financing It is clear that the ECB key interest rate has only a limited influence. Mortgage interest rates are more closely aligned with the capital markets and government bond yields. As long as these remain high, home ownership will hardly become cheaper despite stable key interest rates.
date: 2026-02-07 11:52:00
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