The European Central Bank has announced a further reduction in its key interest rate of 0.25 points and is still forecasting inflation of 2% in the eurozone in 2026.

After a phase of unprecedented credit increases to combat exceptionally high inflation, the ECB lowered rates in June for the first time in five years.

Good news for future buyers. The European Central Bank (ECB) resumed its policy of easing credit in small steps on Thursday, September 12, making a second rate cut in three months. The deposit rate, which is a benchmark because banks still have the abundant liquidity provided by the ECB during the crisis years, was as expected reduced by 25 basis points to reach 3.50%.

The decline in inflation, to 2.2% in August in the eurozone, argued in favor of a new easing, after that of June, as did the sluggishness of economic activity in Europe. In France, inflation stood at 1.9% in August, according to INSEE, a first since August 2021.

By lowering its benchmark rate, the ECB will influence the terms on which banks lend to each other and, consequently, borrowing conditions, providing a small breath of fresh air to ease tensions on mortgage credit and corporate lending. The timing of further rate cuts remains uncertain: the ECB Governing Council has not provided any guidance on the pace of monetary easing.

After a phase of unprecedented credit increases to combat exceptionally high inflation, particularly following the Russian war in Ukraine, the guardians of the euro lowered rates in June for the first time in five years.

The ECB also slightly revised downwards its growth forecasts for the period 2024 to 2026, while leaving inflation projections unchanged. The eurozone economy is expected to grow by 0.8% this year, instead of 0.9% forecast in June. In 2025 and 2026, growth is expected to be 1.3% and 1.5% respectively. Inflation is expected to fall below the 2% target by 2026.