The European Central Bank (ECB) left interest rates unchanged, ending an unprecedented streak of 10 consecutive rate hikes, even as it insisted that rising market talk of rate cuts was premature.

The ECB has lifted rates by a combined 4.5 percentage points since July 2022 to combat runaway inflation but promised a pause last month as record-high borrowing costs are starting to work their way through the economy.

Announcing the freeze in Athens, ECB President Christine Lagarde said "The Governing Council today decided to keep the three key ECB interest rates unchanged." But what does this mean for the economy and the people of Europe?

The hope is that freezing interest rates will encourage consumers and companies to borrow and spend money, increasing economic stability without impacting inflation. 

Of course, recent history has proven that financial concerns are often at the mercy of global events. Lagarde listed recent 'shocks' that have affected financial confidence. 

"The totally unjustified war of Russia against Ukraine, which refers to the tragic development as a result of the terrorist attack on Israel," she said. "We are monitoring the situation. We are very attentive to the economic consequences that that could have, whether in terms of direct or indirect impact on energy prices or the level of confidence that economic actors will continue to display."

Such geopolitical issues affect the economy, as does climate chaos. On the one hand, extreme weather phenomena cause crops to fail and thus food prices to rise. 

Similarly, geopolitical issues in countries that produce oil and gas will also affect prices – and if everybody is paying more in energy bills, the suffering will also affect the economy.

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