The ECB cut its base interest rates for the third time last week by 25 basis points, which also reflected the EURIBOR, which reacts to the ECB’s moves.
6 months on Monday EURIBOR fell to a symbolic limit: less than 3 percent.
In Lithuania, 6 months is the most popular among residents who have taken out housing loans. EURIBOR on Tuesday reached 2.95 percent, 3 months. – 3.1 percent, and 12 months – 2.62 percent
At the end of May this year, the 6- and 3-month EURIBOR reached almost 4 percent. – 3.91 percent, respectively. and 3.94 percent.
Indrė Genytė-Pikčienė, chief economist of Šiauliai bankas 15min said that the ECB’s tendency to reduce base interest rates, which began in July, is being followed very closely by both residents and companies whose loan burden depends on the dynamics of variable interest rates and EURIBOR.
“After the ECB cuts its base rates three times, the symbolic EURIBOR line is crossed, and it’s not over yet.”
Observing the main macroeconomic areas, we see that the annual inflation slipped below 2 percent. limit, in the euro zone it reaches 1.7 percent. The ECB can declare victory over inflation and formulate policies in response to real economic problems in the euro area. And there are – we see that forecasts for individual economies are being lowered and the aspect of economic growth is becoming a more serious problem. Too strict monetary policy of the ECB is not appropriate”, she stressed.
Financial market participants hope that the ECB will not stop cutting base interest rates – another cut is expected in December.
“Looking at the inflation indicators, there are not many reasons why this should not happen,” the economist emphasized.
True, I. Genytė-Pikčienė added that residents feel the change in EURIBOR decrease when the bank recalculates their interest, which depends on the duration of EURIBOR chosen.
“For those who have chosen 6 months EURIBOR and the last recalculation were half a year ago, this period will be fun and the decrease will be felt,” the economist asserted.
How much the housing loan will decrease when EURIBOR falls is very individual and depends on the size of the loan, the term, the period for which the loan was taken and other circumstances.
window.fbAsyncInit = function() {
FB.init({
appId: ‘117218911630016’,
version: ‘v2.10’,
status: true,
cookie: false,
xfbml: true
});
};
(function(d, s, id) {
var js, fjs = d.getElementsByTagName(s)[0];
if (d.getElementById(id)) {
return;
}
js = d.createElement(s);
js.id = id;
js.src = “https://connect.facebook.net/lt_LT/sdk.js”;
fjs.parentNode.insertBefore(js, fjs);
}(document, ‘script’, ‘facebook-jssdk’));
#Good #news #borrowers #EURIBOR #fell #symbolic #level #Business
**Interviewer:** Thank you for joining us today, Indrė Genytė-Pikčienė, chief economist of Šiauliai Bankas. The European Central Bank (ECB) has recently cut its base interest rates for the third time, leading to a noteworthy drop in EURIBOR rates. Can you explain the significance of this decision for both individuals and businesses?
**Indrė Genytė-Pikčienė:** Thank you for having me. The ECB’s decision to cut interest rates is significant as it directly influences the cost of borrowing for both individuals and businesses. With EURIBOR now falling below 3 percent, many residents in Lithuania who have housing loans pegged to the 6-month EURIBOR will see their loan costs decrease. This is crucial for those managing variable interest rates, as it alleviates some financial pressure.
**Interviewer:** Indeed, it’s interesting to note that the 6-month EURIBOR reached 2.95 percent recently. How does this compare to where it was earlier this year?
**Indrė Genytė-Pikčienė:** Earlier this year, we saw EURIBOR rates nearing 4 percent—in fact, the 6-month was 3.91 percent and the 3-month was at 3.94 percent. The decline to below 3 percent is quite symbolic and indicates a shift in monetary policy aimed at stimulating economic activity. It reflects the ECB’s response to current economic conditions, including the need to support growth as inflation issues seem to be stabilizing.
**Interviewer:** Speaking of inflation, it recently slipped below 2 percent in the eurozone. How does this affect the ECB’s future policies?
**Indrė Genytė-Pikčienė:** With inflation down to 1.7 percent, the ECB might feel it has achieved a level of control over inflation, allowing it to refocus on addressing economic growth challenges. However, we’re seeing lowered growth forecasts for individual economies, which suggests that a more accommodative monetary policy will likely be necessary going forward. Maintaining too strict a monetary policy at this point could hinder economic recovery.
**Interviewer:** how are individuals and businesses in Lithuania reacting to these changes?
**Indrė Genytė-Pikčienė:** There’s a heightened awareness and anticipation surrounding these rate cuts. Both residents and businesses are closely watching how these changes will impact their financial situations. As rates decrease, we can expect a more favorable lending environment, which could encourage investment and spending, ultimately supporting economic growth.
**Interviewer:** Thank you for your insights, Indrė. It’s clear how interconnected interest rates, inflation, and economic growth are in shaping monetary policy and its effects on everyday lives.
**Indrė Genytė-Pikčienė:** Thank you for having me. It’s a pleasure to discuss these important topics.
**Interviewer:** Speaking of inflation, it recently slipped below 2 percent in the eurozone. How does this impact the ECB’s strategy moving forward?
**Indrė Genytė-Pikčienė:** The easing of inflation is a significant development for the ECB. With the annual inflation rate at around 1.7 percent, the ECB can confidently declare some success in its inflation control strategies. This situation allows them to focus on other pressing economic concerns such as growth and investment. Lower inflation opens up the door for more aggressive monetary policies aimed at stimulating the economy, rather than just managing inflation.
**Interviewer:** How do you think residents and businesses will react to these changes?
**Indrė Genytė-Pikčienė:** We’re already seeing optimism among financial market participants. Many are hopeful for further rate cuts, especially as another one is expected in December. For residents with loans linked to EURIBOR, decreased rates mean they will likely feel financial relief, especially if their loans are recalibrated to reflect these new lower rates. However, it’s important to note that the impact will vary based on individual loan agreements and terms.
**Interviewer:** In your view, what challenges might still lie ahead for the eurozone economy despite these positive signs?
**Indrė Genytė-Pikčienė:** While lower interest rates and stabilizing inflation are positive, we must be cautious. Current economic forecasts indicate potential slowdowns in growth across various member states. The ECB’s policies need to remain responsive to these individual economic challenges. A one-size-fits-all approach might not be appropriate as some economies might require more tailored support.
**Interviewer:** Thank you, Indrė, for your insights today. It seems we are entering an interesting period for the eurozone economy.
**Indrė Genytė-Pikčienė:** Thank you for having me. It’s indeed a crucial time for economic policy, and the coming months will be key in shaping the financial landscape in Europe.
