ECB reduces Leit zins again: What does that mean for your loans?

ECB reduces Leit zins again: What does that mean for your loans?

Eurozone, Europa - On June 5, 2025, the European Central Bank (ECB) reduced the key interest rate by 0.25 percentage points to 2 percent. This represents the eighth interest rate in a row since June 2024 and could have far -reaching consequences for borrowers and savers. ECB President Christine Lagarde justified this measure with the decline in the inflation rate, which was only 1.9 percent in May, and is therefore below the target value of 2 percent. The interest rate reduction leads primarily to lower monthly installments for variably interest -bearing loans, which could relieve many households.

The effects of the interest rate are mixed. While borrowers can benefit from favorable conditions, savers must expect their interest rates to their savings. The best savings interest range is currently 2.2 percent for one -year ties. Experts have various opinions on future interest policy. Gunter Deuber of Raiffeisen Research expects an interest break at the next ECB meeting in July and predicts a key interest rate between 1.5 and 2 percent at the end of the year. Tomasz Wieladek by T. Rowe Price, on the other hand, sees further reduction, possibly up to 1.25 percent. PGIM Fixed Income agrees with the choir and expects interest reductions, but only under 1 percent in a clear recession.

inflation dynamics and consumer behavior

The decline in the inflation rate in the euro area could also lead to the ECB adapting its interest rate policy. Consumers report noticeable inflation in everyday life, while the inflation expectations rise. Important retailers such as Lidl and Aldi already announce price reductions, which represents a reaction to the increasing cost of living. Lidl speaks of the "largest price reduction of all time" and reduces the prices of 500 items by up to 35 percent. Aldi plans similar measures for 1,000 articles, while other chains such as EDEKA and REWE are active.

In May, the overall inflation in the euro zone fell to 1.9 percent, but food prices remain a problem. These continue to increase, with the inflation of milk, sausage and chocolate over 3 percent. Fruit, vegetables, fish, meat and poultry even show inflation rates of over 4 percent. In Germany, the inflation rate is 2.1 percent, which is slightly above the euro zone average. A third of the population feels threatened by the lack of reserves and has concerns about future price fluctuations.

market reactions and economic framework conditions

The sunken energy and raw material prices as well as the import prices, which fell by 1.7 percent in April, also contribute to the reduction in inflation. Consumers say that they do not feel significant relaxation at the prices. The increasing inflation expectations indicate a lack of trust in the ECB. Many citizens expect price increases of 3.1 percent in the next 12 months, which has been the highest value in over a year.

Current interest development also has a direct impact on financial decisions. Experts advise to compare loan offers and make short -term credit applications in order to benefit from the low interest rate level. These aspects are particularly crucial for construction financing, since the amounts of loan are high and the terms are long. In the event of falling interest rates, consumers should rethink their investment strategies in order not to miss less beneficial offers.

The ECB is likely to continue to consider interest reductions. In the coming months, the quality of monetary policy could decisively depend on how quickly consumers experience a noticeable relief for inflation.

For more information, please visit 5min, https://www.tagesschau.de/wirtschaft/ScuRinur/ezb-lezinenscheid-100.html) [Finanztip.