ECB-Leitzins future: Are we facing the end of the interest rate cuts?

ECB-Leitzins future: Are we facing the end of the interest rate cuts?

Frankreich, Land - The European Central Bank (ECB) may be faced with the end of a series of interest rate cuts that have been carried out for over a year. The current key interest rate is 2.25 percent, after a total of seven interest rate reductions since June 2024, as Vol.at . According to the Latvian central bank boss Martin's Kazaks, the ECB could soon have reached its destination for interest rate cuts. Inflation in the euro area was 2.2 percent in April 2025 and thus moves close to the aim of 2.0 percent of the ECB.

In addition to the current interest rates, the conditions for banks that want to borrow fresh money from the ECB are 2.40 percent. The deposit rate was recently reduced by 0.25 percentage points. Kazaks emphasizes that developments in the trade conflict are crucial for the ECB's monetary policy decisions. There is a probability of around 90 percent that the key interest rate will be reduced by another 0.25 percentage points on June 5, 2025.

Future view and possible risks

ECB director Isabel Schnabel has spoken out for maintaining the interest at the current level. This comes in an environment in which France's central bank chief Francois Villeroy de Galhau also sees space for a interest in the interest until summer, but at the same time warns of the possible risks of a trade war. The uncertainties in this area could affect the trust of households and companies.

In the past few months, the dollar index has decreased by around three percent since US President Donald Trump made customs announcements regarding China on April 2, 2025. These developments underline the fragile economic conditions that influence the global economy and especially the euro area.

Current monetary policy measures

On April 17, 2025, the ECB council decided to reduce the three key interest rates by 25 basis points, as on the official website of the ECB ecb.europa.eu documented. The new interest rates came into force on April 23, 2025. This decision reflects an updated assessment of the prospects of inflation, and the current economic situation shows that the disinflation process progresses in accordance with the expectations.

The price lift for services has recently weakened and measurement variables of the underlying inflation indicate sustainable stabilization around 2 percent. Despite the challenges through global trade voltages, the economy of the euro area shows resilience to external shocks, even if the growth prospects have been scattered.

Overall, the ECB's monetary policy strategy remains dependent on data, without determining a certain interest path. The committee is ready to use all the necessary instruments to stabilize inflation and maintain monetary policy transmission.