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Signals Additional Reductions in Interest Rates by ECB

End of January seems virtually guaranteed for ECB's rate cut. While the exact figure remains undetermined, indications suggest a 25 basis points reduction.

Imminent interest rate reduction by the ECB at the end of January is nearly inevitable. The exact...
Imminent interest rate reduction by the ECB at the end of January is nearly inevitable. The exact reduction magnitude is unclear, but strong indications point towards a 25 basis point decrease.

Steady as She Goes - ECB's Services Inflation Focus

Signals Additional Reductions in Interest Rates by ECB

After the ECB's latest rate decision, central bank buffs haven't ruled out another rate drop in the coming year, but it ain't a foregone conclusion yet. In January, they're still weighing their options, and a full percentage point drop seems highly doubtful.

mpi Frankfurt

Let's Flip the Page

Following the central bank's rate decision on Thursday, several ECB council members hinted at more rate reductions later this year. But when it comes to the magnitude of the cut, there's plenty of squabbling - with many leaning towards another 0.25 percentage point decrease.

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Insights:As of the most recent decisions in April 2025, the European Central Bank (ECB) has trimmed its key rates by 25 basis points[3][5]. The mainstream prediction points towards another cut in June or July, though January 2026 forecasts aren't widely available in current reports[5]. Most analysts focus on immediate matters, without clear projections for January.

Regarding a 0.5 percentage point cut at the next meeting (January, presumably), this scenario seems improbable under current market trends and ECB guidance[4][5]. The ECB has adopted a deliberate, incremental easing strategy - cutting rates by 0.25 percentage points per meeting, with no indication of a larger step anytime soon.

Breakdown:

| Meeting Timing | Expected Magnitude | 0.5% Cut Likely? ||---------------|-------------------|------------------|| April/June/July 2025 | 0.25% | Unlikely || January 2026 | Not specified | Unlikely |

In a nutshell, the predicted magnitude for the next EBC rate cut is 0.25%, and a full percentage point drop in the near term, including January, seems dubious based on the ECB's cautious methodology and stated approach[4][5]. Keep in mind that precise predictions regarding January 2026 usually emerge closer to the end of 2025.

  1. The European Central Bank (ECB) has recently trimmed its key rates by 25 basis points, and analysts predict another cut in June or July.
  2. Despite the possibility of another rate reduction in the coming year, a full percentage point cut at the next meeting, likely January, is considered highly improbable.
  3. The ECB has adopted a cautious, incremental easing strategy, with no indication of a larger step like a 0.5 percentage point cut anytime soon.
  4. Precise predictions regarding the ECB's strategy for January 2026 usually become clear closer to the end of 2025.

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