Euro Area Interest Rate

Euro Area Interest Rate

Euro Area Interest Rate

ECB Refinancing Rate in Euro Area

The European Central Bank (ECB) maintained historically low policy rates from 2013 to 2021, reflecting prolonged economic sluggishness and low inflation in the Euro area. The ECB even adopted negative rates to stimulate economic growth and counter deflationary pressures. By 2022, the focus started shifting towards normalizing policy in response to recovery signs and rising inflation

The ECB Refinancing Rate ended 2022 at 2.50%, up from the 0.00% end-2021 value and significantly higher than the reading of 0.25% a decade earlier. For reference, the average policy rate in Major Economies was 3.50% at the end of 2022. For more interest rate information, visit our dedicated page.

Euro Area Interest Rate Chart

Note: This chart displays Policy Interest Rate (%) for Euro Area from 2014 to 2023.
Source: Macrobond.

Euro Area Interest Rate Data

2019 2020 2021 2022 2023
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 2.50 4.50
ECB Overnight Deposit Rate (%, eop) -0.50 -0.50 -0.50 2.00 4.00
3-Month EURIBOR (%, eop) -0.38 -0.55 -0.57 2.13 3.91
10-Year Bond Yield (weighted avg. %, eop) 0.37 -0.09 0.28 3.00 2.87

ECB leaves rates unchanged in July

At its meeting on 18 July, the Governing Council of the European Central Bank (ECB) decided to keep the three key ECB interest rates—the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility—unchanged at 4.25%, 4.50% and 3.75%, respectively. The decision was in line with market expectations and followed a 25 basis point cut in June.

The ECB’s decision to maintain interest rates was primarily influenced by domestic factors, including still-high domestic price pressures—particularly for services—and the expectation that headline inflation will remain above target well into next year. The Bank noted that some measures of underlying inflation had increased due to one-off factors in May, while most others were stable or decreased in June as a result of still-tight monetary policy. Regarding activity, the ECB expects the Euro area economy to have slowed in the second quarter amid still-muted industrial and external sectors. Moreover, the Bank now views risks to the outlook as tilted to the downside.

The Governing Council did not provide specific forward guidance on the future path of interest rates but stated its determination to keep policy rates sufficiently restrictive for as long as necessary to ensure inflation returns to its 2.0% medium-term target. It emphasized a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction, indicating that future interest rate decisions will be based on its assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission without pre-committing to a particular rate path. Nonetheless, the ECB now views risks to economic growth as tilted to the downside, rather than balanced; this could support rate cuts in upcoming meetings despite persistent upside risks to inflation. Our Consensus is for around 50 basis points of interest rate cuts by end-2024. The next meeting is scheduled for 12 September.

Nomura analysts expect the ECB to cut twice this year: “The ECB will rely on its new forecasts at the September meeting, as well as data on wage growth and unit profits between now and the September meeting to determine [the future path for rates]. We expect wage growth and inflationary pressures to slow sufficiently, such that the ECB can cut twice more this year, in September and December.” Meanwhile, ING’s Carsten Brzeski is slightly more hawkish: “As we think that inflation will remain sticky and it actually needs a further weakening of demand to structurally bring inflation back to target, there is not a lot of room for manouvre for the ECB in the coming months. Picking up the ECB’s theme of data dependency, we see a 50% chance for a rate cut in September and a 100% chance for a cut in December.”

Consensus Forecasts and Projections for the next ten years

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects European interest rate projections for the next ten years from a panel of 17 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for European interest rate.

Download one of our sample reports to visualize what a Consensus Forecast is and see our European interest rate projections.

Want to get access to the full dataset of European interest rate forecasts? Send an email to info@focus-economics.com.

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