/
/
/
Previous/1.00%
/
/
/
Forecast/1.00%
/
/
/
Definition/

The benchmark rate is considered to be one of the main monetary tools used by the European Central Bank, whereas it is mainly used to maintain risk to price stability along with the growth levels in the sixteen economies. This rate is the lowest rate banks can give money at; there is a difference between the benchmark rates, deposit rates and the lending rates.

The interest rates are not just a number used, because this number has a bigger effect by altering the path a certain economy is going through.

/
/
/
General Effect/

The interest rate policy directly affects the money supply in the financial system which would eventually reach to the final consumer and investors. The interest rates are altered based on the inflationary levels in addition to the growth levels where those rates must be decided upon by a committee in order to balance between the growth and consumer prices.

If inflation surges above the ECB comfort zone the European Central Bank will start getting ready to hike rates just to mitigate elevated prices, but when growth slides slowly putting the zone under the threat of a contraction the ECB will continue slashing rates just to ease the money in markets which would bolster growth levels.

But if rates where not adjusted based on solid data a imbalances can occur, because it the ECB slashes rates in order to revive a slowing growth then they have to put in mind that this attempt will spur inflation so based on that the bank must carefully put into consideration the inflation rates in addition to the slowing rates and visa versa if the bank wants to hike rates they must consider that high rates would stop the economy from growing.

The rates does not really have that an effect on financial markets between the projections would be priced in markets, but because the ECB main effort to have a transparent policy they hold a press conference forty five minutes after the decision is out explaining why the bank decided to take those rates. Mostly likely the press conference is held by the ECB chairman moves markets heavily, because anticipation of more rate cuts or hikes can be concluded from the conference.

/
/
/
Best Case Scenario/The ECB is scheduled to announce its interest rates decision in which expectations show they will leave them steady at 1% and the best case scenario would be if the central bank states that economic conditions in the euro zone have improved as a result of the quantitative easing of 60 billion euro dominated bonds.
/
/
/
Worst Case Scenario/The worst case scenario would be if the central bank states that conditions still need improving and that they might have to extend their buying bonds program to help jolt the euro zone out of recession faster.
/
/