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ECB Initiates Consecutive Rate Cuts for First Time Since Euro Crisis
Interest update – October 2024
June, September, and now October. The European Central Bank (ECB) has lowered the interest rate by 25 basis points, marking its third rate cut in 2024 and the second consecutive reduction—a sequence not seen in 13 years (see graph).
Inflation is now at 1.7%, its lowest level since April 2021 and below the 2% target.
Inflation is now at 1.7%, its lowest level since April 2021 and below the 2% target.
The ECB’s last meeting of the year will be on December 12th . Monetary analysts predict four more rate cuts by mid-2025, to be followed by a period of stability. According to the ECB’s survey, marginal rate adjustments could occur in 2026, especially in the first half, which would bring rates to around 2% for that year.
As a result, the Euribor has declined. In October, the monthly Euribor rate stood at 2.711%, a decrease of 0.225 points from the previous month’s 2.936%. Starting 2024 at 3.609%, the Euribor has accumulated a total drop of 0.898 points over the year, as illustrated in the accompanying table and graphs.
As a result, we are starting to see a reaction from the banks. With inflation now at a low and the Euribor experiencing steady declines, further cuts are expected into 2025. This trend has prompted a cautious response from banks, which are gradually reducing interest rates. As the ECB signals possible marginal adjustments by 2026, the Eurozone may enter a phase of rate stability, providing a potentially favourable environment for both borrowers and lenders.
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Patricia Nadal
spain@spectrum-mortgages.com