The interest rate of the European Central Bank has reached its lowest level since the creation of the monetary union; the current interest rate is 0.5%. This more specifically refers to the interest rate the ECB asks in return for providing funds to banks. This leads to a declining interest rate on the average consumer’s traditional savings account.
Due to the interest rate cut of the ECB, banks are less willing to pay a higher interest rate on normal savings accounts. And the Central Bank already offered a low interest rate to begin with. The underlying reason for the interest rate cut imposed by the ECB is the expected impact that it should have on the consumer. The declining interest rate should encourage the average consumer to spend his/her savings, thus giving the European economy a well-needed boost.