Bank analyst: two more rate hikes likely as Euribor nears 3%

The six-month Euribor rate, which determines housing loan payments for Estonian residents, continues to rise and is approaching the 3% mark. As recently as January, the rate stood at just over 2.1%.

Euribor tracks the European Central Bank's base interest rates but has recently been rising noticeably faster than them. This month the ECB raised its base rate to 2.5%. According to Estonian public broadcaster's news programme "Aktuaalne kaamera," further rate increases are expected later this year and in spring next year.

Two hikes seen as most likely

SEB bank analyst Mihkel Nestor said two more interest rate hikes are most likely, making a six-month Euribor level around 3% a logical outcome.

Looking further ahead, a 12-month Euribor could approach 3.5%, which would imply four rate hikes in total. However, Nestor said this scenario is hard to believe, as it would require something genuinely serious to happen in the energy market — specifically, high energy prices would need to drive inflation higher across all of Europe. Currently, he said, there are no signs of that happening.