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Refinancing Rate (Eurozone)

Definition: The Refinancing Rate is the rate at which banks may make overnight deposits in the Eurosystem.

Description: The Refinancing Rate is the main interest rate in Europe. The ECB has set a goal to keep inflation under 2%. Accordingly, if consumer prices are growing at an annual rate of more than 2%, the ECB will likely intervene and raise interest rates.

Influence: High interest rates lead to a decrease in lending and trigger an increase in consumer savings, causing a slowdown in economic growth. A rise in the Refinancing Rate usually leads to an increase in capital flowing into the Eurozone and provides a boost for the euro in the medium term. However, if the increase in rates is not accompanied by rapid economic growth, this may lead to economic stagnation and have a negative impact on the euro in the long run.

Market Impact: High

Released: Monthly, usually on the first Thursday of the month at 11:45 GMT. The ECB president's press briefing begins at 12:30 GMT.

Source: The European Central Bank


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