Leitzinserhöhung

Leitzinserhöhung refers to an increase in the key interest rate set by a central bank. Key interest rates, such as the main refinancing rate in the Eurozone or the federal funds rate in the United States, are crucial tools of monetary policy. Central banks use these rates to influence the cost of borrowing money throughout the economy. When a central bank decides to raise its key interest rate, it becomes more expensive for commercial banks to borrow money from the central bank. This increased cost is then typically passed on to consumers and businesses through higher interest rates on loans, mortgages, and other forms of credit.

The primary objective behind a Leitzinserhöhung is often to combat inflation. By making borrowing more expensive, central banks aim to reduce overall demand in the economy. When credit is less accessible and more costly, consumers may spend less, and businesses might postpone investment plans. This cooling effect on demand can help to alleviate upward pressure on prices, thereby bringing inflation under control.

However, a Leitzinserhöhung can also have potential drawbacks. Higher interest rates can slow down economic growth by discouraging investment and consumption. For individuals with existing variable-rate loans, such as mortgages, an increase in the key interest rate will lead to higher monthly payments, potentially straining household budgets. Businesses may also face increased financing costs, which could impact their profitability and expansion. The decision to raise interest rates is therefore a delicate balancing act for central banks, weighing the need to control inflation against the risk of dampening economic activity.