Euro Interest Rate Hike and Your Money

Armen Hareyan's picture
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Euro Interest Rate

How does the the interest rate hike at European Central Bank affect your money supply and the management of your finances?

At today's meeting, which was held in Paris, the Governing Council of the ECB took the following monetary policy decisions:

  • The minimum bid rate on the main refinancing operations of the Eurosystem will be increased by 25 basis points to 3.25%, starting from the operation to be settled on 11 October 2006.

  • The interest rate on the marginal lending facility will be increased by 25 basis points to 4.25%, with effect from 11 October 2006.

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  • The interest rate on the deposit facility will be increased by 25 basis points to 2.25%, with effect from 11 October 2006.

While the Euro area economy was gradually growing the interest rate hike affects your financial situation by further tightening the money supply for the economy and for the ordinary citizens.

The dollar has not changed very much in regard to this rate hike and if you plan to take your family to a European vacation the rising rates have boosted the dollar for the past two years.

Any rate hike by the Federal Reserve or European Central Bank impacts the prime rate and many consumer products are tied to prime.

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