On a crucial day for the monetary fate of the continent, following Lagarde’s official resignation, the Governing Council of the European Central Bank decided to keep interest rates unchanged.
The rate on deposits therefore remains unchanged at 2.50%, that on main refinancing operations at 2.65% and that on marginal loans at 2.90%. A pause expected by analysts after the upward revision in September.
Inflation rising and the hypothesis of a new rise in December
During the press conference on Thursday 29 October at 2.45pm, after confirming her resignation on 7 February, Christine Lagarde expressed concern about the price trend in the coming months. The following continue to weigh on the cost of living:
- geopolitical risks linked to conflicts in the Middle East and Ukraine;
- the prices of energy raw materials.
The decision to slow down on rates and freeze the cost of financing, thus leaving mortgage installments and loan costs unchanged without introducing new increases, reflects a picture of strong economic uncertainty, marked by the resumption of tensions over energy and by inflation that rose to 3.8% in September, still far from the target of 2%.
Although the ECB board assessed the possibility of a rate increase already in today’s session, the line of caution ultimately unanimously prevailed. However, the possibility of a new increase at the December meeting is not excluded, in the event that the data on the cost of living show a worsening in consumption.
What changes for those who have already taken out a mortgage or requested a loan
The rate freeze represents a respite for families, but the actual impact changes based on the type of contract drawn up with the bank:
- those who have a contract linked to the Euribor, at a variable rate, avoid yet another immediate increase in the monthly instalment, which however remains at levels significantly higher on average by 40% compared to two years ago;
- no change for those who have already taken out a fixed rate loan in recent years, with the installment remaining blocked for the entire duration of the repayment plan;
- for those who intend to take out a new loan, the rates are around 2.60%-2.80% and, adding the spread applied by the credit institutions, place the new fixed mortgages on an average APR of between 3.30% and 3.70%;
- on new car or liquidity loans the average rates (Tan) remain between 7.5% and 8.5%, while ongoing fixed rate contracts do not undergo any changes.
Tensions on French bonds
Frankfurt’s decision is influenced by the instability of France, where government bond yields have soared to their highest since 2002 due to political uncertainties over the approval of the 2027 budget, which have led to long and determined street protests.
Regarding the risk of speculation on government bonds of countries with high public debt (Italy, Spain, Greece and France, nds), Lagarde reassured the markets, confirming that the institute has all the tools to stop unjustified financial shocks, specifying however that there are no preferential lanes or reserved agreements to support individual states.
The move of the American Fed
The ECB’s waiting line is also reflected across the Atlantic. The American Federal Reserve has in fact confirmed interest rates in the range between 3.75% and 4.00%, freezing the cost of money close to the midterm elections in the United States to monitor the evolution of growth and wage dynamics.
