ECB Interest Rates: Forecasts for 2024, 2025, 2026

Forecast for ECB Interest Rates for 2024, 2025, and 2026

The next three years are expected to mark a significant decrease in the cost of money in the Eurozone, following record increases starting in the summer of 2022 by the central bank to bring inflation back towards the 2% target.

2024 Outlook

After the April 11 meeting, the three rates controlled by the Eurotower remained unchanged at 4.50%.
Investors, households, and businesses are now eagerly awaiting the decision on June 6, with the first rate cut widely expected.

Forecasts for 2024 indicate a reduction in the main refinancing rate (MRO) of at least 1% by the end of the year, bringing the cost of money down to 3.5% from the current 4.5%.
This gradual approach aims to avoid abrupt interventions and is supported by expectations of a 2.4% inflation rate.

2025 Expectations

In 2025, experts anticipate an ECB interest rate of 3.0%.
Forecasts suggest a further 50 basis point decrease in the cost of money as inflation is projected to stabilize at 2.0%.
Price developments and wage growth moderation will be crucial factors influencing this trend.

2026 Projections

Looking ahead to 2026, forecasts continue to point towards a steady decline in interest rates, with an additional 50 basis point cut expected to reach 2.5%.
Stable inflation at 2.0% in two years suggests favorable conditions to mitigate upward price risks, contingent on geopolitical and labor market dynamics.

Any shocks, whether geopolitical or related to wages, could disrupt inflation trends and prompt the ECB to reassess its strategy, potentially keeping rates unchanged for a period or even considering rate hikes as a last resort.