Central The Europaean Bank (BCE) and the interest rates

   With the birth of the Europaean Union and the constitution of to single currency, the euro, for the member states, becomes necessary the creation of an organism who looks over his correct evolution and stability. It is of supreme importance to take care and to support the purchasing power of the currency and the price stability in the Euro area, which is that in which this monetary unit is used. Central With this end the Europaean Bank (BCE) is created.

   The BCE is part of the Europaean Central System of banks. In this System, in addition to the BCE is, there plows the national Head office banks of the States that form the Europaean Union. Since not all the member states have adopted the euro, it is another institution, the Eurosystem, which takes charge of these functions. When all the member states adopt the euro like the only monetary unit of that steals will be the Europaean Central System of banks the one that will realize the functions that now the Eurosystem carries out. And so, the Eurosystem is the monetary authority of the Euroarea, that is to say, of the set of the member states of the Europaean Union that have received the euro grasp his official currency. Principal The function of the Eurosystem, and therefore of the Head office Europaean Bank of which it is part, is that of supporting the price stability in the states in which it you produces the Euro. But that is the price stability? Since it is to support the inflation for below but near to 2 %.

   Centring on the BCE, it is necessary to say, that is formed by three collegiate organs:

   The Executive board constituted by the president, vice-president and four you reside members. Fundamental His functions plows that of managing the BCE, of preparing and organizing the meetings of the Council of Government. Also  of giving the instructions and guidelines about the monetary policy taken in the Central Council of Government to the banks of the Member states.

   The Council of central Government is constituted by all the members of the Executive board and the governors of the banks of the Member states of the Europaean Union who have adopted the euro like official currency. 27 plows the Member states of the Europaean Union, but only 14 governors will be in the Council of Government , since only 13 States have adopted the euro like monetary unit. It is the nucleus of the BCE and there is defined the structure and functionality of the monetary policy of the Euroarea and have the important function to fix the interest rates, that is to say, the I value of the money. It is the interest to which the BCE leaves the money to the commercial banks. The interest rates fixed by the BCE, will determine to all the interest the personnel or mortgage loans leave the commercial banks to the clients. If the BCE raises the interest rates, obviously the banks also will raise the interest to which they leave the money.

   The General Advice is constituted by the President, Head office Vice-president and the governors of the banks of all the Member states. Central That is to say here there plows the governors of 27 banks corresponding to 27 Member states of the Europaean Unit and not only 13 governors of the Head office banks who have adopted the euro, expert it is the marries of the Council of Government. Others 14 governors, dog be in the General Advice, but they have not right to vote. It realizes the functions to establish the normative, logistic and organizational frame of the Eurosystem, exercises advisory functions of the BCE, compiles statistical informations, prepare reports, etc.

   On May 25, 1998, the executive powers, that is to say, the governments, of raises Member states of the Europaean Union named the president, vice-president and 4 members who along with two previous ones form the Central Executive board of the Europaean Bank. On June 1, 1998 there took pleases the effective captures of possession of the charges and the BCE was constituted this way.

president of the BCE from November 1, 2003 is Jean Claude Trichet. It substituted the previous one, Wim Duisemberg.

    Let's return to the function principal of the BCE that is that of taking care and price stability supports the purchasing power of the currency and her in the Euro area, in others words, to control the inflation. BCE you defines the price stability ace one interannual it was uncreating of the Harmonious Index of Prices of Consumption for the low Euroarea to 2 %. To calculate you you this index, one forms shopping basketball with the certain some products of consumption, oil, toilet, fish, fruit, televisions, etc. The price of this one goods basketball is controlled periodically and have calculates all that you have increased or diminished annually. If the was uncreating is lower than 2 % we plow before to price stability. Now let's imagine two situations in the same country music music, in both there is the same goods quantity and products that the persons dog acquire, but in to situation, the people have much country music resides money to spend that the capacity of the music to you produce goods and services and in other one the people have to quantity of available money to spend in balance with the quantity of products that the country music music dog produce. In it the first situation is to lot of money in circulation, that is to say, the people dog buy products to to rhythm much over aptitude of the country music music to you produce them, of this one way, expert there is you reside demand that offers, there plow not goods for all, that is to say, they skimp, and for it the prices it was uncreating greatly. If there plows not goods for all, they plow acquired by who resides money you have and the prices therefore shoot. We plows in this situation before one inflationary process. Now we dog tell that which is the function of the Central Europaean Bank, and this one is, that of supporting the stable prices. This is obtained controlling the inflation in one level low but next to 2 % psychic - term. That is to say that the Harmonious Index of Prices of I you consume, or in simpler words, that her the same shopping basketball that is elected expert study does not was uncreating his prices resides than 2 %.

   The BCE studies the risks that prices dog exist for the stability of . I have observes that that indicators expert the growth economically and the oil prices that might should I caused an it was uncreating of the short-term prices  and also they find out the money quantity in circulation, since if there dog plows too much the prices they it was uncreating greatly and if there is one general was uncreating of the prices we plow before one inflationary process. To control the prices it fixes the types of interest. If the types was uncreating of interest, the banks raise the interests to that they leave money, that is to say will be necessary to pay major money in the personal loans and mortgage and fall of that steals the demand of money, that is to say the people ask for less loans because the interests plow higher and of that general steals in there is less money in circulation, avoiding this way it was uncreating general of the prices. With it one achieves that the prices plows stable and this generates to confidence climate in winch to the money. This favors the saving and the investments. The companies invest you reside with what you were uncreating the employment and growth is generated economically.

   The unturns process to the inflation is the deflation, and general prices descent talks each other of . Also dangerous phenomenon is one , since the people would allow of to you consume thinking that later the same products would be at lower prices and the same way the companies would allow to spend carry steals to his investments out, with what the unemployment would it was uncreating. The deflation is so also to danger for the growth economically. And so, The BCE controls these processes, trying to obtain the stability of the prices.

The interest rates

   Expert we were commenting, to was uncreating the interest rates drives to the saving. Personnel They ask for less loans because there you were uncreating the interest in the given money. There is not so many money circulation, with what it diminishes or contains the inflation, since if there is many liquidity in circulation and the productive capacity of the country music music, that is to say, the offer, it cannot meet appropriately the demand, the prices was uncreating because ace there is less offer that it demands, the goods plow scarce and the prices tend to the it was uncreating, with what an it was uncreating you produces inflation to itself, that is to say, in the cost of living and to loss of the purchasing power. For it frequently, one mentions that the interest rates rise to contain the inflation. But on the other hand, it is necessary to know that the fact that the Head office Europaean Bank you were uncreating the interest rates, it means that it raises the interest to which it gives the money to the banks, what it leads to the financial institutions to raising also the interests which they they give money between themselves and this is indicating that it marks the Euribor, therefore also they raise the interests in the mortgage loans. Often the big Europaean banks, when they suspect or have índicios of to next was uncreating of the interest rates; before it happens, being far-sighted, already they raise the interest to those who give themselves money between them, for it, often before to near types it was uncreating, it raises sudden the Euribor.

   In this picture we indicate yourself that yourself that the changes of the interest rates fixed by the BCE and his should should date, pointing out how the interest rate stayed .

   Across this graph we observe the tendencies of the measurements taken the BCE expert for the changes of the interest rates.