After a period of significant volatility in the interest rate markets, there is now clear evidence of stability. The European Central Bank has completed its interest rate cut cycle and has maintained the deposit rate at 2% since June. This has restored calm to the European interest rate landscape.
Recent publications from ABN Amro and Rabobank, among others, indicate that financial markets are not anticipating further cuts in the near term. The ECB even accepts that inflation could temporarily fall below its target in 2026 and 2027, because the eurozone economy is proving more robust than previously thought and because the previous easing measures will continue to have an effect for a considerable time.
For Europe, this means the bottom of interest rates is in sight and the focus is now shifting to long-term rates, where term premiums have gradually risen since the summer. This is due to higher government deficits, political uncertainty, and the pension transition, which is shifting liquidity towards shorter maturities around the turn of the year. As a result, 10- and 30-year interest rates, in particular, have been slowly moving upwards in recent months.
In the United Kingdom, the picture is different. Minister Reeves's budget was favorable for the bond markets, partly because the budget buffer was larger than expected. Ten-year gilt yields fell by a few basis points immediately after the presentation. At the same time, the way is open for another interest rate cut by the Bank of England (BoE) in December. The budgetary measures reduce the inflation outlook by about 0,3 percentage points, giving the Monetary Policy Committee (MPC) additional room for easing.
A second step is expected in the coming months, after which the BoE will likely also apply the brakes. As a result, the pound is volatile, but analysts expect the currency to recover somewhat in the short term now that budgetary uncertainty has been removed.
On the other side of the Atlantic, pressure is mounting on the Federal Reserve to lower interest rates. Market prices now suggest a more than 75% chance that the Fed will take the first step as early as December, fueled by dovish commentary from Fed governors and political pressure from the White House. Macroeconomic data is temporarily less useful due to the government shutdown, but the deteriorating labor market is making the Fed cautious.
While the ECB is stalling, the Fed appears to be considering several more cuts in 2026. This could push the US interest rate towards 3% and thus trigger a significant weakening of the dollar. The euro has been moving in a strong upward range for months and is now trading consistently above 1,16 to 1,18. This supports European imports but puts pressure on the export position, especially combined with the US trade tariffs that remain in place.
For the Netherlands, this international interest rate environment means that financing conditions remain stable. The previous interest rate cuts have already boosted lending and will continue to have an impact in 2026. The combination of a stronger European growth outlook, declining inflation, and an ECB that remains inactive for the time being creates a relatively calm monetary environment.
At the same time, long-term interest rates remain sensitive to international tensions and higher government financing needs, making a slight increase at the long end likely. The broader picture is therefore that the phase of rapidly falling interest rates is over and we will primarily enter a period of stabilization in the coming period, with occasional fluctuations due to geopolitical news and interest rate policy in the US and the UK.