The European Central Bank (ECB) has already cut interest rates multiple times in 2025, most recently on April 17, 2025, by another 0.25 percentage points to a deposit rate of 2.25% and a main refinancing rate of 2.4%. These rate cuts occur against the backdrop of continuing declining inflation in the euro area, which was around 2.2% in March 2025, as well as economic uncertainty due to US trade policy.
Further Rate Cuts on the Horizon?
Villeroy de Galhau from the ECB hints that further interest rate reductions are possible later this year. The ECB aims to bring inflation back down to its target level while flexibly responding to current data and developments. Expert forecasts suggest that there could be several more downward rate adjustments this year; JP Morgan expects up to four additional cuts, potentially bringing the main interest rate down to about 1.50% by the end of the year. Other institutions, like Berenberg Bank, anticipate only one further small reduction or even a pause in rate cuts, depending on the economic conditions and geopolitical tensions.
Impacts for Savers and Investors
- Lower interest rates mean lower returns for savers, as savings rates tend to fall with the key interest rates. This can make traditional savings products like overnight or time deposits less attractive.
- Investors may increasingly turn to riskier investments to achieve higher returns. This applies to stock markets as well as alternative asset classes.
- Loans will become cheaper, which can encourage investment – both for businesses and private households.
- Overall, lower interest rates influence investment behavior in such a way that capital flows more into growth-oriented investments rather than conservative savings products.
In summary, the ECB is expected to continue its rate-cutting policy throughout the year or at least not rule it out in order to further manage inflation. This has direct implications for the behavior of savers and investors through changed yield prospects and financing conditions.