Euribor Forecast 2026

Current trend overview

Euribor rates have declined significantly from their 2023 peak, when the 6 month Euribor exceeded 4% for the first time in over a decade. The European Central Bank's aggressive rate hikes to combat inflation drove that surge. Since mid-2024, the ECB has reversed course, cutting rates as inflation has eased toward its 2% target. The 3 month and 6 month Euribor tenors—the most widely used for variable-rate mortgages in Spain, Italy, Portugal, and elsewhere—have followed this downward path. Current levels reflect a more accommodative monetary stance, with markets pricing in further cuts over the coming quarters. The pace of decline will depend on inflation data, economic growth, and ECB communications. Explore the 3 month Euribor and 6 month Euribor pages for live rates and historical trends.

ECB policy outlook

The ECB's Governing Council sets policy at meetings roughly every six weeks. In 2024 and early 2025, the focus shifted from rate hikes to rate cuts. The deposit facility rate—the primary policy lever—was reduced in several steps. Market participants expect this easing cycle to continue into 2026, assuming inflation remains under control. The exact path depends on incoming data: if core inflation proves sticky, the ECB may pause or slow cuts; if the economy weakens and inflation falls faster, cuts could accelerate. Christine Lagarde and her colleagues have emphasised a data-dependent approach. Key indicators include wage growth, services inflation, and GDP growth. Analysts generally anticipate a gradual normalisation toward a neutral rate, with the deposit rate settling in a range that neither stimulates nor restricts the economy. This outlook supports a gradual decline in Euribor toward more moderate levels than the 2023 highs.

Inflation outlook

Eurozone inflation peaked above 10% in late 2022, driven by energy prices and supply chain disruptions. It has since fallen sharply, returning to the ECB's 2% target region in 2024. The ECB projects inflation to stabilise around 2% over the medium term, assuming no major shocks. Energy base effects have largely played out; the focus is now on core inflation (excluding energy and food), which tends to be stickier. Services inflation and wage settlements remain important. If wage growth moderates and productivity improves, the inflation outlook stays benign and the ECB can continue cutting. A reacceleration of inflation—for example due to geopolitical supply shocks or wage spirals—would force the ECB to hold or raise rates, supporting higher Euribor. Most baseline forecasts assume a gradual normalisation, with inflation oscillating near 2% and the ECB maintaining a cautious easing bias.

Scenario analysis: rates fall / stable / rise

Scenario 1: Rates fall

If inflation continues to moderate and the eurozone economy weakens, the ECB may cut rates more aggressively than currently priced. In this scenario, the 3 month and 6 month Euribor could decline further, potentially reaching levels well below 2% by late 2025 or 2026. Borrowers with variable-rate mortgages would benefit from lower monthly payments. This scenario is more likely if growth disappoints, unemployment rises, or a recession materialises, prompting the ECB to provide more stimulus.

Scenario 2: Rates stable

A "soft landing"—inflation at target, growth around potential—could lead the ECB to pause after a few more cuts. Euribor would stabilise at a moderate level, perhaps in a 2–2.5% range for the 6 month tenor. This scenario balances the need to support the economy with the need to guard against inflation re-igniting. Borrowers would see relatively stable mortgage payments after the initial decline from 2023 peaks.

Scenario 3: Rates rise

If inflation proves sticky or re-accelerates, the ECB may halt cuts or even raise rates again. Geopolitical shocks (e.g. energy supply disruptions), persistent wage pressures, or a services inflation spiral could trigger this. In this scenario, Euribor would rise from current levels, increasing mortgage costs for variable-rate borrowers. While not the consensus view, it remains a tail risk that households and investors should be aware of.

Disclaimer

This content is for informational purposes only and does not constitute financial, investment, or legal advice. Euribor forecasts are subject to significant uncertainty. Actual rates depend on ECB decisions, economic data, and market conditions that can change rapidly. Consult a qualified financial adviser before making decisions based on interest rate expectations.