Germany: Reactions to ECB interest rate decision from key financial figures

Following today’s decision by the European Central Bank (ECB) to lower interest rates by 0.25 percentage points, industry leaders have shared their perspectives on the impact and implications of the move.

Francesco Fedele, CEO of BF.direkt AG, commented, “The ECB’s decision to cut rates by 0.25 percentage points was anticipated. Given that forecasts predict a return to a 3.5% key interest rate by the end of 2024, it is likely that we will see two more reductions of 0.25% each. However, we believe it is premature for such cuts at this time. The inflation trend, although seemingly positive with Germany’s August inflation rate at 1.9%, remains volatile due to fluctuating energy costs. Inflation could surpass 2.0% in September. Moreover, core inflation in the eurozone, which is still above the ECB’s target, is more critical than Germany’s national rate. While the impact of rate hikes on the real economy is delayed, the capital markets react swiftly. The ECB’s cut might lead to inflationary expectations, pushing up long-term interest rates, though its immediate effect on ten-year financing rates, vital for the property sector, is limited.”

Patrick Brinker, Head of Real Estate Investment Management at Hauck Aufhäuser Lampe, observed, “The current interest rate environment is manageable for the property sector. The era of higher interest rates is over, despite today’s ECB cut and similar potential moves by the US. Property markets have adjusted, and prices have stabilized. This is an opportune moment for long-term investors to initiate new investments rather than waiting. Family offices and international investors are already taking action and making their first moves.”

Peter Axmann, Head of Real Estate Clients at Hamburg Commercial Bank, remarked, “The ECB’s rate decision aligns with market expectations and is already factored into current interest rates, so we don’t anticipate an immediate shift in financing costs. However, the rate cut is beneficial for the property sector, providing greater certainty that the peak interest rate is behind us. This will help in more accurately calculating purchase prices, contributing to a gradual increase in transaction volumes.”

Prof. Dr. Felix Schindler, Head of Research & Strategy at HIH Invest, noted, “The ECB’s reduction of the deposit rate by 25 basis points meets market expectations and aligns with its communicated strategy. Nonetheless, challenges remain, particularly with price trends in the services sector and the path to achieving the ECB’s medium- to long-term inflation target. The rate cut will offer a psychological boost to the property market and aid in its stabilization, even though its effects were anticipated and factored in by the markets.”

As the financial sector processes the ECB’s latest move, the broader implications for investment strategies and market dynamics will continue to unfold.

Photos order: Francesco Fedele, CEO, BF.direkt AG, Patrick Brinker, Head of Real Estate Investment Management, Hauck Aufhäuser Lampe, Peter Axmann, Leiter Immobilienkunden, Hamburg Commercial Bank and Prof. Dr. Felix Schindler, Head of Research & Strategy, HIH Invest