Interest rate up in March

21/04/2006 09:51

The Dutch long-term interest rate, based on the return of the latest ten-year government loan, averaged 3.7 percent in March, i.e. 0.2 percent points up on February. In September 2005 the long-term interest rate fell to its lowest level for a long time. Compared with September, the rate was more than half of one percent point higher in March.

The European Central Bank (ECB) increased its interest rates in March 2006 by 0.25 of a percent point. The previous ECB intervention was in December 2005, when interest rates were raised by 0.25 of a percent point too. The lowest rate on the interest market is the ECB deposit rate, which is 1.50 percent since 8 March 2006. The main ECB interest rate, the repo rate, is 2.50 percent since 8 March 2006.

The article published in Economic Monitor’s focus on 1 December 2005 deals with the relationship between interest rates on the capital market and interest rate interventions by the ECB.

One of the main directives for the ECB’s decision to change or refrain from changing the interest level is the inflation level in the eurozone. In the last few years, the  inflation rate in the eurozone has wavered around 2.1 percent, with a dip of 1.6 percent in February 2004. According to Eurostat, the statistical office of the European Union, it averaged 2.2 percent in March. The ECB directive for inflation in the eurozone in the medium term is set at approximately 2 percent.

Capital market interest rate (latest ten-year government bond)

Capital market interest rate (latest ten-year government bond)