The “surprises” of recent weeks – favorable in inflation and less favorable in the economy – led the ECB to move forward with a third consecutive interest rate cut, as expected. But, despite admitting “concern” about the economy, Christina Lagarde He did not clarify the extent to which “restrictive” interest rates may be contributing to the recent decline in activity (and was not questioned about this). Even with Thursday’s cut, a further decline is likely in December and analysts are betting that Credit rates return to 2% in June of next year. Some even wonder if it was necessary to have raised interest rates so much.

“The disinflationary process is underway“, stated Christine Lagarde at the press conference after a meeting of the Governing Council that, this time, was not held in Frankfurt but in Ljubljana, the capital of Slovenia. “It’s too early to say we broke our necks.” of the inflationary threat, although “everything indicates that we are going there.

These are statements that the Frenchwoman made to justify herself simultaneously: 1) why the ECB lowered interest rates earlier than expected in September; and 2) Why, despite three consecutive cuts, is it necessary for interest rates to remain at 3.25% (a level that is certainly restrictive of economic activity) when the president of the ECB herself admits that the risks for economic activity Do they lean towards the negative side?

Despite confirmation that Germany, the eurozone’s largest economy, has a negative economic growth rate, the ECB is confident that “Certainly” we are not facing a risk of recession on the block Even so, economist Holger Schmieding of Berenberg Bank considers it likely that the ECB will revise growth estimates downwards when it publishes the next macroeconomic projections, forecasting growth in 2025 below the 0.8% calculated in September.

If confirmed, “it will be one more argument for the ECB to go ahead with another interest rate cut in December, as is almost universally predicted,” says the economist, adding that “the persistent weakness of economic growth supports our belief that I have had for a long time, that The ECB went too far by raising the interest rate to 4%“.

It is in this context that the (always volatile) interest rate futures markets are betting that the Euribor – which is not set directly by the ECB but which tends to closely follow the interest rates decided by the monetary authority – could fall to 2.66. % at the end of the year (in the case of the six-month Euribor, which is currently around 3%) and for 2.04% until June of next year.

Unlike the 12-month Euribor, the six-month index – the most used in Portugal – remains slightly above 3%. SOURCE: Euribor-rates.eu

This means that, according to the calculations of Nuno Rico, economist at Deco Proteste, a mortgage loan of which 150,000 euros still remain to be paid, with spread of 1% and the 6-month Euribor, the installment in October 2024 will be 738.61 euros – but if the average monthly Euribor drops to 2%, then The fee will drop more than 100 euros to 633.41 euros.

“The drop in interest rates announced by the ECB, in addition to the prospect of new cuts in the coming months, is great news for families and companies that have loans with variable rate indices,” says GianLuigi Mandruzzato, senior economist. from EFG bank. in an analysis shared with the Observer.

The expert adds that “the flexibility of financing conditions It will be especially positive for the so-called “peripheral” countries of the eurozone, including Portugal“.

The ECB is expected to cut interest rates again in December. “25 points is probable, 50 points is possible”

After the press conference ended, ECB sources who spoke to Reuters reinforced the view that the central bank It will cut interest rates again in December. – unless economic data released in the coming weeks points to a reversal in inflation data (this after Eurostat estimated annual inflation of 1.7% for September).

“It seems that, at this moment, the ECB’s objective is to bring interest rates to more neutral levels as quickly as possible” says Carsten Brzeski, chief economist at Dutch bank ING, who refers to the ECB’s own calculations that an interest rate in the region of 2% would already be “neutral” and would therefore neither restrict nor stimulate economic activity.

Although the idea is to reach that neutral interest rate “as quickly as possible”, as Carsten Brzeski says, analysts agree that the ECB, if it can, will want to continue making successive cuts in the minimum dose (25 basis points). since accelerating the pace of declines (up to 50 points, for example) could convey a potentially counterproductive image of panic. The “gradualism” that Mário Centeno spoke of a few weeks ago should continue to be the watchword.

But, although he agrees that the probable scenario is another 25 basis points in December, Jack-Allen Reynolds, of the British consultancy Capital Economics, says that “it is possible” that the expected downward revision of the growth prospects (with inflation controlled) would lead the ECB to reduce interest rates by 50 basis points.

“Our expectation, after today’s press conference [quinta-feira]is that the ECB will reduce interest rates by 25 basis points at each of the next meetings, at least“, says Jack-Allen Reynolds, stating that, in his opinion, “It would not be surprising if the ECB opted for a 50 basis point cut. at some point during this cycle of falling interest rates,” whether in December or early next year.