At the beginning of October, the Belgian ten-year interest rate was still at 3.6 percent, the highest level in more than eleven years. But since the end of November the trend has been downwards. Investors seem to assume that central banks no longer need to raise interest rates to combat inflation, which has fallen sharply. More and more investors are even taking into account an interest rate cut in the spring of next year.
That statement was further fueled on Tuesday by statements made by ECB director Isabel Schnabel in an interview with the Reuters news agency. In it, the German said that a further interest rate increase by the European Central Bank has become “rather unlikely” now that inflation has fallen noticeably. Schnabel is considered a so-called ‘hawk’, i.e. in favor of stricter monetary policy. Schnabel did not clarify whether and when the ECB will lower interest rates next year.
Lower interest rates are good news for the government treasury, because it has to raise billions every year on the financial markets. Home loans, which are linked to Belgian OLOs (linear bonds), also theoretically become cheaper when interest rates fall. And finally, shares also normally benefit from lower interest rates.