Euro room before interest rate reduction: Experts expect final stop!

Euro room before interest rate reduction: Experts expect final stop!

German Economic Research Institutes assume that the European Central Bank (ECB) will only carry out an interest rate cut before a longer break. The current key interest rate in the euro area is 2.5 percent, which is close to the neutral level, in which the economy is neither promoted nor slowed. According to Vol.at the ECB council will probably reduce the interest again before a break occurs.

The financial markets already speculate on a reduction in interest rate to 2.25 percent in the next ECB session. Possible further interest reductions in June and two more until the end of the year are also under discussion. The uncertainties due to international trade disputes, especially as a result of US special tariffs on European products, put a strain on the European economy and could endanger growth.

Current interest rates and inflation expectations

The ECB council decided on March 12, 2025 to reduce the three key interest rates by 25 basis points each. The new interest rates for the deposit subjectity, the main refinancing transactions and the top -refinancing facility are 2.50 %, 2.65 %and 2.90 %. This change reflects the updated assessment of inflation prospects and monetary policy transfer. Bundesbank emphasizes that the disinflation process progresses well and develops inflation in harmony with expectations. The total inflation is estimated to be 2.3 % for 2025.

A stable inflation course is of central importance for the ECB, with the medium -term goal of 2 %. This objective aims to keep price increases low enough so as not to burden the economy, but also high enough to avoid negative developments if inflation is too low. The ECB has recently launched a survey to perceive inflation in order to better capture the expectations of the population and to develop corresponding monetary policy measures, as