ECB Convenes as Ukraine-Russia Crisis Signals Persistent Negative Interest Rates

The European Central Bank (ECB) is set to meet on Thursday amid escalating conditions between Russia and Ukraine. The political unrest in Eastern Europe could potentially hamper the EU’s economy through the persistence of negative interest rates as a result.

The “informal get-together” had been initially intended towards deliberating the central bank’s end of bond-buying stimulus plan to make way for the first interest rate hike to be implemented following its March 10th policy meeting. However, the current prospect of war between Russia and Ukraine could potentially spell less commerce, more energy costs and other economic issues, given that Europe is significantly incumbent on Russia for trade.

Yannis Stournaras of the ECB said to Reuters, "In my view it is going to have a short-term inflationary effect – that is prices will increase due to higher energy costs." He contended that "in the medium to long term I think that the consequences will be deflationary through adverse trade effects and of course through the rise in energy prices."

©Photo: The New York Times