"The downgrade is already priced in with more than 100 percent probability, according to derivatives estimates, so the fact that a 25 basis point downgrade is taking place today is unlikely to have much impact on Euribor, which is of most interest to ordinary people," SEB bank's Fixed income broker Erik Laur told ERR an hour before the ECB's decision was announced.

LHV Bank's Economist Triinu Tapver made the same point on Thursday morning. "I don't think that today's cut in the Euribor will bring any significant change now," she said.

Tapver pointed out that while the six-month Euribor peaked at 4.1 percent at the end of last year, it has fallen since then and has recently remained relatively stable at around 3.7 percent.

She reiterated that, since interest rates on home loans usually change every six months, the reduction in base interest rates and the related Euribor changes cannot immediately affect loan payments.

New cuts expected this year

Laur said what the ECB says today will be more important than the cut: "With three cuts currently priced in for this year, it would be very interesting to know what guidance the European Central Bank will give on further cuts."

Tapver also said that if the central bank does not make another cut in the summer, one or two may be made in the autumn. They will also come in increments of 0.25 percentage points.

"So my baseline forecast is that the six-month Euribor will be somewhere around 3.5 by the end of the year. It might be a bit lower, but I think the most likely Euribor at the end of the year is 3.5 percent," she told ERR.

ECB President Christine Lagarde did not discuss future plans at Thursday's press conference.

Before the decision, Swedbank's Chief Economist Tõnu Mertsina also said the rate cut was very likely and that it would not lead to an additional sharp drop in the near future.

Interest rate cut could start to revive economy

"But in the coming months, interest rates will surely continue to fall, and this will, of course, be passed on through Euribor to housing loans. And if housing loans gradually become cheaper, this will improve the purchasing power of people who have mortgages," Mertsina said.

He said that approximately a quarter of Estonian households have a housing loan.

"And this in turn should gradually boost the construction market and also start to have a more positive impact on consumption. As real wages grow, i.e. wage growth will remain strong, inflation gradually slows down, interest rates go down, this should have a positive impact," he explained.

Tapver agreed: "Even for those people who do not have a loan, this effect will be indirectly felt when the economy starts to pick up. After all, the Estonian economy has been in recession for two years now, and if the economy gets a little bit of a boost, then people could also see wage growth, because businesses will gradually start to do better, there will probably be new jobs or not so many redundancies. But it's worth remembering that it's not going to happen right now, it's more of a slow growth here."

On Thursday, the ECB said it was cutting its main interest rate from an all-time high of 4 percent to 3.75 percent, the BBC reported.

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