Ifo: “More interest rate cuts unlikely in 2025”

Brussels – The rate-cutting cycle may have ended, not only in Europe but globally. The Munich Economic Research Institute, Ifo, raised the alarm based on experts’ expectations. According to the Economic Experts Survey, a quarterly survey conducted by Ifo and in collaboration with the Swiss Economic Policy Institute, in 2025, the expected global average inflation rate is 3.9 percent. “Greater interest rate cuts are unlikely with these inflation expectations,” said Ifo researcher Niklas Potrafke.

There is a risk that we may not see an easing of monetary policy because “inflation expectations remain above central banks’ targets.” In the absence of a return toward benchmark targets, it becomes more difficult to assume new reductions in the cost of borrowing. It is bad news for households and businesses struggling with mortgages and loans.

The situation also affects the European Union and the euro area. In 2025, experts predict the lowest inflation rates in Western Europe (2.1 percent). However, the figures change when looking at different regions of the continent. Expectations in other parts of Europe remain above the target. Specifically, in 2025, average inflation is expected at 3.5 percent in southern Europe and 7.5 percent in eastern Europe.

As early as January 30, we will see what may happen in the eurozone as the Governing Council of the European Central Bank will meet in Frankfurt. The ECB remains committed to a data-driven and evidence-based approach. It will propose a new rate cuts solely on this basis.