Particle.news

Download on the App Store

ECB Lowers Key Rate to 2% After Eighth Cut Since Mid-2024

Inflation at 1.9 percent has pushed real rates into negative territory, prompting the bank to signal a pause in easing.

Mehrere Euro Banknoten liegen zusammen
Image
Image

Overview

  • ECB President Christine Lagarde said the central bank is nearing the end of its monetary policy cycle after responding to shocks from the pandemic, Ukraine war and energy crisis.
  • The latest rate cut has had limited impact on mortgage costs, with ten-year loan rates holding around 3.5 percent due to their link to long-term German bund yields.
  • Inflation’s drop just below the 2 percent target aligns the refinancing rate with the estimated neutral rate, reducing scope for further cuts.
  • Housing market sentiment improved in May, but analysts warn that government stimulus measures will be crucial to sustain residential construction.
  • Negative real rates are squeezing savers, who are being advised to consider longer-term investments like ETFs to secure better returns.