The ECB will begin “tapering” interest rates this month, but analysts forecast the cut to reach 25 basis points by the end of 2025.

The moment has come. He European Central Bank (ECB) will change its monetary policy, and at the meeting that its Board of Governors will hold in the near future Thursday, June 6 will reduce interest rates 25 base points, prior to placement price of money at a rate of 4.25%from the current 4.5%.

This change in direction has been anticipated since the beginning of the year by bands like Future home buyers who needs to ask for one mortgage finance it and that when rates fall they will find cheaper offers on the market. They also current pledged They will benefit from the change in direction of the Eurobank and, having seen their deposits rise by an average of €8,000 over two years, they will see them become cheaper as the euro falls. Euribor. Overall, the reduction in rates will benefit all those who are forced to apply for a loan from a bank, since the interest that the bank will charge them will be lower as the price of money falls.

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Analysts are taking for granted a 25 basis point drop on Thursday following remarks from the ECB’s vice president. Luis de Guindoswhich noted in late May that “we are taking a cautious approach that favors a 25 basis point reduction in interest rates.”

This advance of the forecasts announced by De Guindos means that “with almost certainlyThe ECB will cut interest rates next Thursday,” he says. Germán García Mellado, bond manager at A&G. Also Ben Laidlerglobal market strategist eToro, takes Eurobank’s downward move as a given as data inflation Europeans “give green light to historic first rate cut.” This is despite the fact that inflation has increased Eurozone in May exceeded expectations, and 2.6%up two-tenths from April but still close to a three-year low.

The first interest rate cut in June comes two years after the regulator decided to raise them in July 2022 to beat inflationand this is the first decrease in the price of money in the eurozone since September 2019, when the ECB cut its rate deposit mechanismkeeping r values ​​constantE-financing and creditwhich have not decreased since March 2016.

What remains unknown is the number and pace of rate cuts the ECB will undertake this year and next. De Guindos did not comment on this point. He limited himself to stating that the ECB has not yet made any decision due to high uncertainty what exists.

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In recent weeks, the eurozone has published macroeconomic data that has moved the region away from recessionAt the same time, it was known that inflation was higher than expected. “This, coupled with the labor market situation, which remains somewhat tight, gives members more arguments. hawkish The ECB is “hawkish” in Spanish and in favor of keeping rates high to cool expectations of the upcoming rate cuts,” insists Germán García Mellado.

According to A&G fixed income manager, another important factor to consider will be the evolution of monetary policy in the USA and the implications this could have for further rate cuts in the eurozone.

In this sense, Christine LagardePresident of the ECB, very categorically pointed out that they do not depend on fed when it comes to raising or lowering rates, and yes, data. However, these statements were softened by several members of the Governing Council, so “it will be interesting to hear what Lagarde thinks at the meeting on June 6.” It appears that the strength of the US economy will delay the start of the Fed’s rate cuts, and this will be an aspect that ECB policymakers must consider when making future decisions due to the implications they could have on the economy. exchange rate divergent monetary policy,” says García Mellado.

All this increases doubts about the future actions of the supervisory authority, starting in July, he admits. Manuel Pintocompany analyst All of these “are reasons to maintain higher types over a longer period of time, keeping in mind any inflationary pressures that may euro weakness” notes Pinto.

In this scenario, the ECB assumes risks deciding to cut rates in June, especially if eurozone inflation continues to move away from its 2% target and the US Federal Reserve and Bank of England are waiting before they start cutting interest rates.

“Data will determine the path of the market, but in our current scenario we continue to see two rate cuts in 2024″, points out Manuel Pinto. Ben Laidler believes it is likely that the “cuts” are “accompanied by a message”don’t rush into new cuts‘ until we see a clearer price trend towards the 2% inflation target. For this reason, most analysts, including Riccardo Marcelli Fabianisenior economist at Oxford Economics refuse produce new rate cut in July.

Ruben Segura-CayuelaBank of America’s chief European economist is getting even more “wet” and predicts that the 25 basis point fall in June will be followed by more 75 basis point reduction in 2024 and adjustment 125 basis points in 2025. He believes that “the next step is more likely to be in September than in July.” Bye Ulrike KastensEurope economist at DWS maintains his forecasts:three more rate cuts until the end of March 2025.”