Despite a recent decrease, the ECB anticipates that inflation will remain relatively high for a considerable period.
ABBL spokesperson Jerry Grbic explains that this decision “of course” directly impacts interest rates in Luxembourg. Banks are expected to adjust their interest rates in the coming months, affecting both lending and deposit rates.
Customers with variable interest rates on their loans will likely experience the 0.25% increase. While fixed-rate loans were more popular in the early months of the year, a quarter of new loans have variable rates, making them susceptible to this rate hike, Grbic explains.
The ECB aims to achieve a medium-term inflation target of 2%. Past rate hikes have led to decreased demand and a slower economy. As such, there is hope that the ECB might refrain from further rate increases and consider a pause in September to allow for economic stabilisation.
