The interest rate turned: This is now the view of the Euribor

The European Central Bank did a good job, he says Swedbank’s chief economist Timo Hirvonen On the broadcast of Talousam on Friday.

ECB raised the key interest rate on Thursday as expected by a notch to 2.25 percent. The background is the inflation that accelerated due to the crisis in the Middle East. It was the first interest rate hike in the euro area since September 2023.

“The interest rate decision was quite good for this situation. It was also well communicated in advance. Inflation is clearly above the target, and it is expected to remain quite high,” said Hirvonen.

The market expects more interest rate hikes. Director general Christine Lagarde did not give a direct hint at the press conference about what will happen at the July meeting.

“Our expectation is that there will be an interest rate hike in September. This will not stop there. But towards the end of next year, we expect that the ECB will already be able to lower the interest rate and the deposit rate will return to two percent,” Hirvonen reflected.

The common reference interest rate for mortgages, the 12-month Euribor, has already taken the lead and risen to 2.85 percent.

“It doesn’t have much room for growth, but the three-month Euribor is 2.4 percent, so it will still rise,” Hirvonen estimates.

Based on market futures At the end of the year, the 12-month Euribor is expected to hover around three percent, while the three-month Euribor is around 2.7 percent.

“When the ECB signals that the interest rate hikes will end, the Euribor will at some point turn down,” Hirvonen continued.

Thursday’s interest rate hike is likely to slow down the recovery of the Finnish housing market.

Watch the interview and the broadcast in full at the attached video link.