On June 5, 2025, the European Central Bank lowered its key interest rates by 0.25% for the eighth consecutive time, bringing the ECB's deposit facility rate down to 2% from 4% at the end of May 2024. Short-term interest rates have been falling steadily and consistently for the past year.

The term “direction of travel” (towards lower rates) previously used by Christine Lagarde has now disappeared from the ECB's vocabulary. Instead, the notion of “end of cycle” was used during the press conference.

For their part, the financial markets are still anticipating a rate cut by the end of the year, at a date that could be between September and December 2025. A second-rate cut is only considered highly unlikely at this stage, with a probability of around 10%.

Since the ECB's first rate cut a year ago, 5-year swap rates have fallen by 60 basis points, 10-year rates by 20 basis points, while 20-year rates have risen by 3 basis points and 30-year rates by 17 basis points, a radically different trend from that of the European Central Bank rates, which fell by 200 basis points over the period.

It should be noted that the yield curve was very inverted at the time, indicating an expectation of a rapid decline in short-term rates, but not in long-term rates.

Today, the yield curve has returned to a positive slope. The three-month Euribor is expected to rise gradually from March 2026, peaking above 3% between 2034 and 2038.

What can we expect for long-term rates in the coming months?

With the ECB considering itself to be “well positioned” to navigate the coming months, the direction of long-term rates could be more broadly influenced by developments in US long-term rates.

In the US, both the Federal Reserve and investors are torn between the inflationary consequences of the tariffs sought by the Trump administration and economic activity indicators, which have been declining for several months.

Finally, perceived risks surrounding the long-term evolution of the dollar as the dominant reserve currency and the financing of an uncontrolled budget deficit are adding to the uncertainty surrounding the future evolution of US rates, where risks are mounting.

In the United States, the Federal Reserve's last rate cut dates to the end of 2024, and uncertainty remains high about the future timetable and even the direction of the Central Bank's next move. While the markets are anticipating two rate cuts in 2025, the Central Bank has given no clear indication, except for its independence.