Where are the ECB's key interest rates heading?

The best indicator is the FED. The ECB is lagging behind as usual.

Current statement from today's meeting with the UBS/CS-CIO office: Expecting the first interest rate cut in the US in 2Q24, a total of up to 150bp still in 24, which is significantly faster than previous estimates. Europe not quite as fast, but still already in 3Q24 and then certainly down by up to 100bp.

Daily update from today's meeting with the UBS/CS-CIO office:
Expecting the first interest rate cut in the USA in 2Q24, a total of up to 150bp still in 24, which is significantly faster than previous estimates.

Europe not quite as fast, but still already in 3Q24 and then certainly down by up to 100bp.

You are clearly more optimistic than our own chief economist in the group. We expect 0.50% in two interest rate steps in the EU in Q3/2024.
In the USA also earlier, but only in the second half of the year. And only up to 4.75% by the end of the year, i.e. -0.75%.

In the market itself, the interest rate steps are all already priced in, which can be seen from the current refinancing rates. However, due to rising liquidity costs, the interest rate cuts do not fully reach customers. Especially refinancing of mortgage financiers with over 60% loan-to-value has become very expensive on the market.

Sorry, I am (fortunately) not at UBS, I am on the other side and just passing on what is said in meetings with our clients :)

However, the cuts go beyond 2024, that may have been unclear. So first cuts in 24, further ones in 25.

Yes, you can already see it at the long end, but it only gets really interesting for the variable rate borrowers when the cut actually happens. And if anyone is considering tying themselves to a fixed rate, I would currently still wait a bit if it can be arranged somehow.

The world has become so heavily indebted in recent crises that interest rates of 2, 3, 4% are no longer possible in the long term. Just look at the interest burden of the Federal Republic. In 2021, there were 4 billion EUR in interest payments in the federal budget, in 2023 it is around 40 billion.

Of course, that is possible. Then you just devalue the debts with inflation.