By reducing the interest rates to continue at a steady pace from European Central Bankincreasing the chances that their final station will be lower than expected. 2025 will, in other words, be a year of significant relief for households and businesses that have loans in euros.

“The direction of travel is clear,” said the ECB President, Christine Lagardeafter the fourth reduction this year of the deposit rate by 25 basis points to 3%.

For households with informed mortgages, taken out by the end of 2022, any further reduction in ECB interest rates will lead to a reduction in their monthly installment. Euribor, which is the benchmark for mortgages, has already fallen close to the 2.8% that banks had “frozen” in spring 2023 to prevent further increases in loan installments.

Interest rate cuts will be many in 2025, based on today’s data, starting from January 30 which is the scheduled next meeting of the ECB. A further rate cut is expected at the meeting on March 6, while overall the markets expect at least four cuts, of the order of 25 basis points each, by next June.

Markets are also now predicting a fifth rate cut next autumn as highly likely, with the ECB’s deposit rate set at 1.75%, a level expected to help the recovery of the Eurozone economy, which oscillates between decay and incorruption after Russia’s invasion of Ukraine and the energy crisis that followed.

The prospect of many more interest rate cuts is not only a market perception, but also reflects the view of many ECB Governing Council members, including Bank of Greece Governor Giannis Stournara.

According to the statement made by the Governor of the Bank of France, Francois Villeroy de Gallo, on Friday, it appears to reflect the majority of the Board. of the central bank. “There will be more rate cuts next year,” he said. While the ECB does not commit to a specific course (of interest rates) in advance, it “feels rather comfortable with the predictions of the financial markets,” Villeroy added.

Also characteristic of the trend that exists is that at Thursday’s meeting ECB officials proposed a further reduction in interest rates, by 50 bp, but the majority was in favor of 25 bp, which seems to it is also the golden ratio that satisfies all opinions within the central bank.

If, therefore, the ECB’s latest quarterly forecasts are confirmed that inflation will converge to its 2% target next year – with domestic inflation decelerating as wage rises are curbed and productivity rises – and growth remains sluggish, then interest rate cuts will be a one-way street.

Other European central banks are following the same course as the ECB, such as the Swiss (SNB) which on Thursday reduced its key interest rate by 50 bp. to 0.5%, the lowest level since September 2022. This cut will also ease some of the exorbitant rates for thousands of households that have taken out Swiss franc loans, although the main reason for the increase in rates for these loans is the large appreciation of the franc against the euro.

The new SNB president, Martin Schlegel, said the big rate cut was aimed at halting the appreciation of the franc that is negatively affecting the growth of the Swiss economy. In fact, he warned investors who flock to the Swiss franc, because they consider it a safe haven, that he is likely to reduce interest rates again, even returning them to negative territory, while he did not rule out interventions in the foreign exchange market for this purpose.

Analysts expect the SNB, which meets quarterly, to cut interest rates again by 25 basis points. in March and an additional 25 m.v. in June, when this will reach zero. It is noted that inflation in Switzerland has essentially been dealt with as it was 0.7% in November.