ECB reduction: interest falls, but what does that mean for savers and buyers?

ECB reduction: interest falls, but what does that mean for savers and buyers?

Euroraum, Europa - The European Central Bank (ECB) has once again decided to reduce the key interest rates, which has already been the eighth interest reduction since the start of the measures in June 2024. The deposit rate is reduced by 0.25 percentage points to 2.0 percent, which means halving since the start of interest reductions last summer. The main refinancing rate for banks is also reduced from 2.4 percent to 2.15 percent, as https://www.vol.at/ezb-senkt-zinsen-um-025- percentpoints/9457247) reports.

The ECB is careful in the current economic situation in view of the "exceptionally high uncertainty". In particular, the customs dispute with the USA burdens the economy and affects the trust of households and the investments. ECB Vice President Luis de Guindos has repeatedly expressed concerns about the negative effects of this trade conflict. President Christine Lagarde sees both risks and opportunities for the European economy in the context of change in global order.

The inflation rate in the euro area dropped to 1.9 percent in May 2025, which means a decline compared to 2.2 percent in the previous month. However, this positive development could not be sufficient to strengthen consumers' trust, since many still have high expectations of inflation. According to [Tagesschau.de, consumers themselves do not experience a noticeable relaxation, since the prices for foods in particular increase.

In the past five years, food prices have increased by an average of 30 percent, with inflation rates of over 3 percent for milk, sausage and chocolate as well as over 4 percent for fruit, vegetables, fish, meat and poultry. Consumers even expect price increases of 3.1 percent for the next twelve months, which has been the highest value for over a year.

Perspectives of monetary policy

The ECB is faced with the challenge of reaching its main goal, stable prices with a medium -term inflation rate of 2.0 percent, while analysts predict a possible break in monetary policy. As soon as prices and consumption are stabilized, further interest rate policy could follow to strengthen trust in the institution. However, analysts warn that too fast interest rate reductions could lead to price bubbles, especially in the real estate market, as in [Vol.at] (https://www.vol.at/ezb-sstenkt-zinsen-um-025- percentage points/9457247) described in detail.

The main market is already optimistic about possible stabilization. The DAX recently exceeded 20,000 points, while many economists speculate whether further interest rate reductions will lead to increased investment activity, or whether the ECB should instead leave interest and should actively combat inflation, as some experts in Tagesschau.de.