European Central Bank

The European Central Bank (ECB) is the central bank of the 20 euro countries, based in Frankfurt am Main. It steers monetary policy for over 350 million people.

Main mandate: price stability – defined as inflation close to 2% over the medium term.

Most important instruments:

• Main refinancing rate: 2.15% (since June 2025) – the "key interest rate"
• Deposit rate: 2.00% – determines overnight money interest rates
• Marginal lending rate: 2.40%
• Bond purchases (QE): between 2015 and 2022 the ECB bought bonds worth over 5 trillion euros

Interest rate development:

• 2014–2022: zero-interest era (0.0% key rate, −0.5% deposit rate)
• Sept. 2023: all-time high of 4.50% (fighting inflation)
• June 2024–June 2025: 8 rate cuts in a row to 2.0%
• Since then: stable at 2.0%

How the ECB affects your life:

• Mortgage rates: key rate falls → cheaper mortgages
• Overnight money rates: follow the deposit rate
• Inflation: the ECB fights inflation with higher interest rates
• Share prices: low interest rates → shares rise (cheap money looks for returns)

Decisions: the ECB Governing Council (6 Executive Board members + 20 central bank governors) meets every 6 weeks. Over 2,500 staff work at the Frankfurt headquarters.