ECB Refinancing Rate - Europe European Central Bank interest rate

European Central Bank (ECB)

The European Central Bank (ECB) is the central bank for the eurozone (euro area, the countries which have adopted the euro). One of the ECB’s main tasks is to set and implement European monetary policy. This includes the use of the interest rate tool. An important objective of the ECB is price stability in the Eurozone (inflation based upon the HICP, harmonised index of consumer prices).

Overview of current inflation in Europe

Refi Rate (Refinancing Rate)

The ECB offers banks the facility to borrow money from it. Banks make use of the lending facility when they are short of funds. The banks pay interest on the loan, which is called the refi rate or refinancing rate.

When reference is made to the European interest rate this often refers to the ECB Refi Rate. The level of this Refi Rate is therefore really the price that banks pay to borrow funds from the European Central Bank. This 'purchase price' is an important factor for banks when setting the interest rates that they charge when they lend money. By raising or lowering interest rates the ECB can exercise indirect influence over the interest levels that the banks apply to interbank transactions, business loans, consumer loans, mortgages and savings accounts, amongst other things. Changing the European Refi Rate will often also affect the exchange rate of the Euro.