The ECB and the Interest Rate Cut Cycle
The upcoming interest rate cut by the European Central Bank (ECB) by 25 basis points on June 5, 2025, is considered a significant event for financial markets. This anticipated further easing of monetary policy is expected to reduce the deposit rate to 2.0%. It marks the eighth rate cut in the current easing cycle.
Background and Market Expectations
- Rate Decision: The ECB will lower the key interest rate by 0.25 percentage points, continuing the ongoing reduction cycle that has been in place since June 2024.
- Timing: The announcement will be made on June 5, followed by a press conference from President Christine Lagarde.
- Market Reactions: Investors are paying attention not only to the current cut but also to hints regarding the ECB’s future strategy.
Consequences for Markets and Investors
- Stock Markets: Lower interest rates increase the attractiveness of stocks, particularly in growth-oriented sectors.
- Bond Markets: An interest rate cut can lead to price gains for existing bonds but reduces the yield on new issuances.
- Lending and Real Estate Market: An increase in lending and the real estate sector reflects the impact of previous interest rate cuts.
Investment Strategies and Risks
- Portfolio Adjustment: Investors may adjust their allocation between stocks and bonds in favor of stocks.
- Risk Assessment: Despite positive impulses, there remains uncertainty about the end of the easing cycle.
- ECB Communication: Signals from President Lagarde will be crucial for market reactions.
Future Outlook
| Period | Expected Key Interest Rates | Comment |
|---|---|---|
| June/July | Further Cuts | At least one more cut is expected. |
| From Autumn | Hold Phase | More likely for a longer pause. |
Conclusion: The interest rate cut could trigger positive impulses in the markets. However, future indications from the ECB will be crucial to determine whether the policy remains moderately loose or if further steps will follow.