INTEREST rates in the Eurozone could fall to 2.5% next year, having closed August 2024 on 3.75%, according to latest research.
The European Central Bank (BCE) in Frankfurt (pictured) is predicted to reduce interest rates next year (photo: Archive/EFE)
The recently-released report by S&P Global Ratings predicts the lower Euribor rate will come off the back of increasing growth in economies that share the common currency, particularly in Spain and France.
For 2024 as a whole, the Eurozone's GDP is expected to have grown by 0.8%, rising to 1.3% in 2025, as consumer spending and investment increases.
Weaker growth is forecast for Germany this year, but Spain and France are likely to be the main economies driving the GDP upwards, S&P finds.
Whilst inflation remains above the European Central Bank's (BCE's) target of 2%, it has reduced significantly this year, ending August on 2.2%.
Also, consumer price index inflation fell from July's 2.8% to 2.4% last month – a dramatic year-on-year difference, given that July 2023 saw it reach 5.9%.
Analysts are now becoming quietly confident of a Euribor rate cut next year, and estimate that inflation could finally reach the 2% target.
The BCE, then under Mario Draghi, dropped Eurozone interest rates into negative figures for the first time ever in February 2016 in a bid to increase consumer spending, borrowing, and strengthening the economy.
Interest would remain below zero for over six years, as inflation continued at well below the 2% target.
Global inflation in 2022 led current BCE chair Christine Lagarde to increasing the Euribor at its fastest level in history – within 10 months, it had gone from minus figures to around 4%.
This month, the BCE plans to reduce the rate to 3.5% - only the second cut so far in 2024.
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