Projected lighting marking the 75th anniversary of Schuman’s declaration, on the Grossmarkthalle building at the headquarters of the European Central Bank in Frankfurt, Germany, May 9, 2025.
Alex Kraus / Bloomberg via Getty Images
The European Central Bank is almost guaranteed to reduce its key interest rate Thursday.
The markets were the last price in approximately 99% of a reduction of 25 base points, according to LSEG data. This would bring the rate of deposit facilities to 2% – half of the middle of the middle of 2023 by 4%.
But Europe faces a very uncertain economic perspective, which raises the question of what the ECB could do beyond Thursday’s meeting.
Inflation now oscillates again around the target of 2% of the central bank, with Flash data Tuesday, showing that consumer prices in the euro zone increased by 1.9% in May. Meanwhile, economic growth has always been slow: the gross domestic product in the euro zone increased by 0.3% in the first quarter of 2025, according to the last estimate.
The block faces many strangers, in the country and abroad. This includes the agenda of the prices of American president Donald Trump – widely considered as having a negative impact on growth – and potential reprisals come from the European Union, as well as from the way in which the main rearmament plans of the EU and Germany’s big tax change could play.
Here is what analysts say about the next potential steps of the central bank and what they could mean for consumers.
Evaluate the prospects for the rest of the year
Analysts and economists are largely expecting more BCE interest rate drops later in the year, but do not count on the bank to give a strong indication of the rate management exactly.
Tuesday inflation figures increased the chances that after this week, the next rate filling could arrive in July, said Jack Allen-Reynolds, deputy chief economist in the euro zone.
Others have given a more cautious tone, barclays economists suggesting in a note last week that rate reductions are on the horizon but will not be implemented from.
“We believe that the ECB will remain without commitment on its political path and will continue to follow a meeting by meeting by meeting to maintain flexibility and optionality in policies calibration,” they said.
They are also expecting more BCE level drops, providing for two other 25 -point reductions in September and December – which means that the ECB would hold stable rates during the summer months.
Elsewhere, a global research report of Bofa published earlier this week said that the ECB “was missing reasons not to descend below 2%”, echoing the suggestion of new rate drops on the horizon.
But, he noted, the ECB is unlikely to give clues to the way it could go.
“We expect the door to be opened to move the rates less than 2%, but a very explicit signal is unlikely. The uncertainty on the prices will give sufficient coverage to the board of directors so as not to pre-commit to more,” said the report.
Above all, the ECB will also publish its latest personnel projections this week, stressing what it expects for inflation and economic growth. This comes after the last report on the prospects of the economic prospects of the organization of economic cooperation and development, which provides for growth of 1% and inflation of 2.2% for the euro zone this year.
How rate reductions can affect consumers
For consumers, more BCE drop drops would mainly affect loan and savings rates.
The way this is going on exactly depends on the type of product they hold and the duration of the rates on them, Low Van Geffen, Macro-Stutège Main at Raboresearch, told CNBC.
For example, he said, a fixed mortgage at 10 years and a request for request would be assigned in different ways.
“The interest rate on short-term deposits tends to follow the deposit rate very closely,” he said.
“A week after the ECB’s meeting, the policy rate comes into force. So, if the ECB reduces the deposit rate Thursday, banks will receive 0.25% interest below their deposits with the Central Bank.
Products with long -term fixed rates have a more complicated relationship with central bank interest rates, he said, because they are not only determined by the current policy rate – which often changes – but also by future expectations.
“The market has long expected that the ECB has been lowering rates this week. So this can already be included in long -term interest rates to a certain extent. This also means that these long -term rates do not necessarily change after this week’s political decision,” said Van Geffen.
