Further Rate Cut by the ECB: Expectations and Impacts
The European Central Bank (ECB) will decide on another interest rate adjustment on June 5, 2025. Markets highly expect a further rate cut, which could have significant impacts on the financial markets and the economy.
Expected Rate Cut
- Magnitude of the Cut: Experts believe that the ECB will lower the deposit rate by 0.25 percentage points, bringing the deposit rate down to 2%. This would be the eighth rate cut within a year.
- Market Expectations: Markets expect an 87% probability that the ECB will announce another rate cut.
Impacts on Markets and the Economy
- Monetary Policy: The rate cut is part of a strategy to make monetary policy more neutral and support economic growth as inflation approaches the target level of 2%.
- Investors and Savers: For private investors and savers, a rate cut could mean that yields on savings accounts decrease, while bonds and other investment forms may become more attractive.
- Economic Conditions: The ECB is responding to moderate growth and decreasing inflation. Lending is picking up, especially in the real estate sector, indicating that interest rates are no longer a barrier.
Future Prospects
- Further Rate Cuts: Some economists expect that the ECB may lower rates again in July before pausing. Others foresee a high probability of a longer hold phase in monetary policy after the June meeting.
- Fiscal Policy: The announced shift towards a more expansive fiscal policy could argue against further monetary easing.
Overall, the ECB’s decision on June 5, 2025, will significantly influence the financial markets and economic development in Europe. The expectation of a further rate cut reflects the ECB’s efforts to promote economic growth and stabilize inflation.