How Long Will The Euribor Remain In Negative Territory?

EuriborEuribor over Spain's mortgages

The 12-month Euribor, which is the reference used for the majority of variable rate mortgages in Spain, has been in an uninterrupted downwards trend since 2012 and is about to complete one year in negative territory. The average daily rate is now near to -0.1%, but market consensus predicts the situation will change in the second half of the year and the indicator will end the year in slightly positive territory.

The official price of money has been at 0% since March 2016 and it doesn’t look as if the ECB is going to increase it in the short-term, although everything will depend on the trend in inflation (particularly underlying inflation) and how solid the incipient economic recovery in the Eurozone is.

Analysts consensus is that the Euribor has already touched bottom, and that it will begin to rise gradually from the second quarter. For the time being, the forecast is for it to end 2017 a little over 0.10%.

It’s a fact that inflationary pressures have intensified on a global level, but it’s also true that the uptick in inflation in the euro area (it rose to 1.1% in December, still far off the 2% target) has been basically due to temporary factors like the base effect from the rise in oil prices.

The ECB could change its current monetary policy (or at least toughen its message on rates) if it perceives any uptick in underlying inflation or in investment which would allow for an improvement in economic activity. That said, it doesn’t look as if that is the current situation.

There seems to be no signs of strong pressure on salaries in the European labour market, so generating persistent inflationary pressure will be difficult.

About the Author

Francisco López
Working for more than 25 years in the world of journalism and communications, Francisco has gained valuable experience at several well-known newspapers such as El Mundo and La Vanguardia. He specialized in economic and financial news before making the leap to the corporate communication sector where he has held several positions: Adviser to the Ministry of Economy, Director of the Bank of Spain’s Communication Department, in addition to his consultancy role at Analistas Financieros Internacionales, where he currently works.