Commentary by Lukas Baškys, Chief Business Banking Officer at SME Bank

The European Central Bank’s (ECB) decision to keep key interest rates unchanged came as no surprise—most experts had predicted this outcome. The deposit facility rate remains at 2%.

For businesses, the primary focus is not the ECB base rate itself, but rather its reflection in the interbank market. EURIBOR rates, which previously peaked above 4%, have now decreased by approximately half. For companies, this translates not only to lower debt service costs but also to the possibility of securing larger financing for the same projects. For example, at SME Bank, the average business loan has grown by about a fifth since the peak of interest rates and currently stands at €363,000.

For businesses planning their finances, the critical question is if and how interest rates will change in the future. The prevailing view is that the ECB will hold interest rates steady throughout 2026. This indicates a period of financial stability for SMEs sensitive to interest expenses. Such a period can be an opportune time for SMEs to review their obligations and evaluate whether it is the right moment for loan refinancing. Companies should also plan their investments without delay—the cost of waiting often outweighs the potential benefits of saving on interest.

Businesses should prepare for a scenario where the peak of interest rates is behind us, but the era of “cheap money”—when rates were zero or even negative—will not return. A 2% interest rate is becoming the new normal. This is the so-called “neutral level,” where the ECB strives to maintain a balance between inflation control and economic stimulation.

Opinions differ on how interest rates will shift in the future. A small number of analysts do not rule out one or two additional cuts to 1.75% or 1.50%. However, this would likely only occur if the Eurozone economy stagnates more than expected or if the Euro becomes too strong against the US Dollar. A stronger Euro would increase the risk of imported deflation.

Conversely, other commentators suggest that if inflation were to rise, a 25-basis-point hike toward the end of the year remains theoretically possible.