He European Central Bank (ECB) gives new joy to the mortgaged. And the body chaired by Christine Lagarde has once again lowered interest rates by 25 basis points. It is the third consecutive decline. This organization, reference for the values of the euro, has left the Reference deposit rate at 3%.
According to the Bank of Spain (BE) These ‘reference’ interest rates are those used as a basis in financial contracts such as, for example, the loan requested to pay for a home (the mortgage). Going back on the calendar, this 3% level is similar to what it was in March of last year.
Now, more than four million families that have a variable-rate mortgage will have a significant reduction since the ECB’s rate cut is linked to the Euribor, which stands at 2.405% in December, when in 2023 it was 4%.
We cut our key interest rates by 0.25 percentage points.
Inflation is coming close to our 2% target and the economy is weakening.
Read today’s monetary policy decisions https://t.co/F03sFQatjU pic.twitter.com/VJwucNBnsJ
—European Central Bank (@ecb) December 12, 2024
A cut based on inflation prospects
The decision that has been made by ECB of lower these interest rates It is linked to the ease of deposit and the outlook for inflation (both CPI and core) as well as the intensity of currency policy transmission.
For the ECB, as they have expressed in their statement, the financing conditions They are relaxing as households already notice that this rate cut gradually reduces the cost of new credit for companies and households.
Monetary policy remains restrictive since previous increases in the reference rate continue to be transmitted to the outstanding balance of credit granted. This organization headed by Lagarde, inputs that it has the “determination” to stabilize inflation at the objective of 2% in the medium term.
The decisions being made about the price of money will be based on the assessment of what is expected from inflation taking into account the new economy. Regarding the purchase of assets (the APP) and emergency purchases (PEPP), the ECB indicates that the former continues to decline at a “measured and predictable” pace.
Macro forecasts
The disinflation continues to advanceand in this way, in 2024 general inflation will reach 2.4% in 2024, falling to 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded trade regime EU emissions allowances start to apply.
For its part, the underlying, which leaves out energy and food and is more volatile, stands at an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in 2026. and 2027. Furthermore, “most underlying indicators suggest that inflation will stabilize sustainably in line with the 2% objective in the medium term.”
And regarding economic activity, it is expected that Europe will continue to grow, although more slowly than in the September projections due to the slowdown in GDP in the fourth quarter. Growth of 0.7% is anticipated in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027.