Analysts estimate Euribor could fall to 2 percent by mid-2025
Analysts believe the European Central Bank will cut interest rates next week and in the months ahead until March. Doing so would mean that the six-month Euro interest rate could fall to two percent as early as the middle of next year.
The six-month Euribor was still in negative territory at the beginning of 2022. A price rally, exacerbated by the European energy crisis, quickly pushed up interest rates, and by October 2023 the Euribor was already at 4.1 percent. A year on, it has now fallen to three percent.
"Our optimism is getting to the point that by the middle of next year, the Central Bank's deposit rate could fall to two percent, which is also close to the Euribor rate, which banks charge each other for interbank settlements," said SEB Bank analyst Mihkel Nestor.
If the Euribor were to be one percentage point, it would make the monthly payment of the average loan customer around €50 to 60 cheaper. According to Nestor, it had been previously thought the Euribor could stay at around two percent for longer, but now he is longer so sure.
"That two percent could be a sustainable level in the longer term. But the future is unclear when we look at the news coming out of the European economy here. The expected take-off has not happened. In Germany sentiment towards the economy has instead worsened," Nestor explained.
The European Central Bank's aim is to keep inflation below two percent.
"And unlike in Estonia, where inflation was three percent in September, in the Euro zone more generally, at least in September, this target was met - Euro zone inflation was 1.8 percent," Nestor said.
As a result, most analysts believe that a new cut will come next week and that the cuts will continue over the coming months until March. However, not everyone is so optimistic.
"If we look at the last year, in fact market expectations were misleading on a number of occasions," said Peter Priisalm, head of investments at asset management company Avaron.
The positive result in September was driven by falling energy prices. However, there are signs that the Euro zone's concerns over inflation have not yet been resolved.
"In services, inflation is still around four percent over the past year. And if we also look at wage growth, wage growth in the Euro zone averaged 4.5 percent in the second quarter. So maybe we are not seeing very clear downward pressure on prices," Priisalm said.
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Editor: Merili Nael, Michael Cole
Source: "Aktuaalne kaamera"
