ECB reports first loss since 2004 due to rate hike

The loss would have been much larger had the ECB not used its €6.6 billion reserve to cover the loss. However, the ECB’s loss can be seen as a financial impact of the monetary policies implemented over the past year. The rise in interest rates has led to higher interest costs for the eurozone’s national central banks. At the same time, the interest income from bonds that the ECB has accumulated over the years has not kept pace with the new interest costs.

The ECB said it would likely continue to lose money over the next few years but expects to be sustainably profitable thereafter. The bank insisted that the financial performance would not impact the ECB’s operations. The bank would be able to continue to carry out its monetary policy mandate despite the loss.

The ECB is currently keeping interest rates high to contain inflation and is expected to keep them there until there is convincing evidence that inflation is returning to its 2% target. Eurozone inflation will fall from 2.9% in December 2023 to 2.8% in January 2024.

Economists expect the ECB to start cutting interest rates in the coming months. ECB President Christine Lagarde has previously left open the possibility of the first rate cut in the summer of 2024.
The ECB last reported a loss in 2004, partly due to the weakening of the dollar and yen.