ECB plans further interest rate cuts: Good news for borrower!

ECB plans further interest rate cuts: Good news for borrower!

Krone, Österreich - loans will probably be cheaper! The European Central Bank (ECB) plans to further reduce its key interest rates so as not to slow down the economy. According to economists, the key interest rate is expected to drop by 0.25 percentage points until it is between 1.75 and 2.25 percent, which is considered a neutral interest rate. This neutral interest rate is crucial because it describes the condition in which the economy is neither heated nor cooled, which means that inflation remains stable. The key interest rate in the euro area is currently 2.75 percent after it has only been reduced, as krone.at reported.

How do the interest affect?

A falling key interest rate affects the borrower, since the banks can offer cheaper conditions. When the ECB lowers interest, banks borrow money from the ECB and often pass on these savings to their customers. This is determined by an interest corridor that determines the conditions to which banks can borrow money among themselves. An example: If a bank needs money at short notice, it can either borrow from other banks or from the ECB. This has a direct impact on interest rates that are offered to customers for loans, while savers may have to expect lower credit rates, as Finanztip.de

The ECB President Christine Lagarde has already confirmed that the downward trend in interest rates continues, which could improve the economic framework of the borrower. An interest rate reduction is generally considered positive for borrowers, while savers may experience disadvantages. These developments show how decisive the ECB's monetary policy is for the finances of the citizens and what influence it has on the market conditions.