In a recent CIJ EUROPE update following the European Central Bank’s latest interest rate decision, industry leaders from BF.direkt and HIH Invest shared their perspectives on the implications for inflation, economic stability, and the real estate sector. After eight consecutive rate cuts since June 2024, the ECB opted to hold key interest rates steady—a move welcomed by both institutions amid continued economic and geopolitical uncertainty. Francesco Fedele, CEO of BF.direkt AG, stated that the decision to pause further cuts is appropriate given current economic conditions. “There is no need for action to change the key interest rate. Inflation continues to decline and is forecast to reach 2.0 percent over the next twelve months,” he said. However, he cautioned that this outlook is subject to significant uncertainty, particularly in the event of a trade conflict with the United States. Tariffs and countermeasures could put upward pressure on inflation, while a broader economic downturn in Germany and the EU might push inflation below target levels. Fedele emphasized that the ECB should remain flexible and ready to respond to either scenario, making the current rate pause a prudent choice. He noted that financial markets expect at least one more rate cut before the end of the year, though BF.direkt supports continued caution. “It remains to be seen how the political environment will evolve in the coming months,” he added. Prof. Dr. Felix Schindler, Head of Research & Strategy at HIH Invest, similarly welcomed the ECB’s decision, describing it as aligned with market expectations. “The inflation rate is now stable within the target range and the yield curve has normalised. A neutral level has been reached, removing immediate pressure for further action,” he said. Schindler highlighted ongoing risks, including uncertainty surrounding global trade negotiations, U.S. Federal Reserve policy, and currency fluctuations. He suggested that the ECB will likely use the summer period to continue monitoring economic indicators before its next decisions in the autumn. From a real estate market perspective, Schindler noted that the current interest rate stability offers a more predictable environment for planning and investment. “Sideways movement in both short- and long-term rates is helping to stabilise calculations in development, acquisition, and asset management,” he explained. He also pointed to improving economic sentiment and public investment in infrastructure and defence as potential sources of positive momentum for the German real estate market. Photos: Francesco Fedele, CEO of BF.direkt AG and Prof. Dr. Felix Schindler, Head of Research & Strategy at HIH Invest