Eamets: Euribor Unlikely to Fall Below 1.8% in the Coming Year

The European Central Bank kept its interest rate unchanged at today's governing council meeting, as expected, meaning the deposit facility rate remains at 2%. This is already the second consecutive council meeting where the interest rate was decided to remain the same. This means that euribor will stay at the level where it is today for the coming months, slightly above 2%. What happens with interest rates next? Everything depends on average inflation in the eurozone. In August, eurozone inflation was 2.1%. For this year, the European Central Bank forecasts 2% price growth for the eurozone, which means that inflation overall is in line with the central bank's set target level.

Analysts are not unanimous about further interest rate cuts. Some analysts are convinced that there will be one more interest rate reduction during autumn, which would bring the deposit facility rate to 1.75%, which in turn means that euribor would stabilize around 1.8% by year-end. Another group of analysts believes that there will be no more interest rate cuts this year and the ECB will cut rates one more time in spring. Personally, I am inclined toward the opinion that there will still be one interest rate cut during winter. Almost consensus prevails on the point that interest rates will not fall below the central bank's 1.75% next year, since various forecasting institutions predict eurozone next year's inflation in the range of 1.6-2%, which entirely corresponds to the central bank's objectives. Therefore, it is also not very likely that euribor would fall below 1.8% over the coming year. But these are expectations, the truth will become clear by the end of next year.