February 2026

Monetary Policy and the Macroeconomic Environment

The appointment of Kevin Warsh as the next chair of the US Federal Reserve Bank has moved the question of the Fed’s independence back into focus. Over the past few months, there has been growing evidence that US monetary policy is increasingly subject to Government influence. Compared to other recent appointees by the US President, the nomination of Warsh, a former member of the Fed’s Board of Governors, actually seems quite sensible. Moreover, one should not overestimate the role of the chairman of the Federal Reserve System. Just like with most central banks, the president’s vote is not definitive. On the Federal Reserve Board of Governors, the chairman’s is only one of twelve votes. So, even if the incoming chairman was to give in to President Trump’s wish for interest rate cuts—which is anything but certain—he would still have to win over a majority on the Board of Governors. Be that as it may, the question whether and to what extent the Fed should align its monetary policy with inflation and stability targets will remain subject to capital market discussions throughout 2026.

Monetary Policy Assessment and Interest Rate Development

But let’s take a look at the central bank on this side of the Atlantic Ocean: The ECB’s decision to leave its key lending rates in place is both correct and consistent. Although the inflation rate in the eurozone has dropped to 1.7 percent lately, the price pressure remains high at around 3.2 percent, most notably in the services sector. A hasty interest rate cut would raise false expectations and undermine the credibility of Europe’s monetary policy. The ECB thus remains stability-oriented. Its reticence makes the bank’s monetary policy look plausible and puts the damper on inflation expectations in the capital markets. This sort of discipline is of paramount importance in long-term financing.

Interest Rate Development

The overall interest rate trend in January 2026 was defined by stability except for minor fluctuations. The 3-month Euribor moved within a narrow bandwidth around 2.03 percent over the course of the month while the 6-month Euribor registered a moderate increase to around 2.15 percent. On the long side, the 10-year swap remained at an elevated but easily manageable level as rates moved between 2.85 and 2.95 percent. In other words, the sideways trend observed in recent months continued. Markets keep failing to price in short-term interest rate cuts or another significant interest rate tightening cycle.

Even in Germany, awareness of the interest burden caused by sovereign debt has increased lately: While the national debt of the Federal Republic of Germany remains moderate compared to other countries, and this even after establishing a massive defence and infrastructure fund, it has gone up significantly. Against this background, it is worth noting that a member of Germany’s Council of Economic Experts suggested recently that the country could be largely incapacitated as early as 2029 if it maintained its current political course. The expert’s core message is that the entire government revenue will be consumed by the costs of defence, interest and social benefits by 2029. It is to be hoped that the German Government will embark on fundamental reform efforts to cope with the mounting pressure. Ideally, as early as this year.

Real Estate Financing: No Wave, but Plenty of Movement

For many real estate industry players, time is even more of the essence than it is for the body politic: To be sure, we have not seen an NPL wave yet. However, loan renewals are becoming more and more of an issue – and not just in the commercial segment anymore, but increasingly so in the residential real estate segment, too. The challenges here are not limited to the banks’ willingness to finance. Even alternative financiers and institutional lenders are increasingly involved in restructuring efforts.

The structure that many follow-up financing arrangements of alternative financiers take is clearly evident, typically including low loan-to-value ratios, higher interest rates, and often an extensive waiver of repayment. The primary objective is to buy time. For time is needed to reposition or refurbish properties or to implement operational adjustments and generally to restore the marketability of assets. However, this will work only with projects of long-term financial viability. Alternative financiers cannot create alternative realities any more than banks can.

Alternative Financiers and Logistics Moving into Focus

We are generally observing a steadily growing demand for alternative financiers. The fact that they are more flexible in regard to structuring, risk assessment and cash flow logic makes them particularly attractive in a highly uncertain environment. While banks are limited by regulatory constraints and often required to act restrictively, alternative lenders are at liberty to handle complex scenarios in more pragmatic ways.

This is particularly evident in the current rivalry in the logistics segment. Here, predatory pricing has become the established practice among lenders in virtually all asset classes. Margins are under pressure, and even property developments are actively funded again – assuming their locations, use concepts and capital structure meet the mark.

Outlook

The market may be as challenging as ever, yet it is becoming more structured. Operators have learned to cope with uncertainty. Instead of waiting for a quick recovery, they opt for controlled adaptation. For auspicious projects, buying time through restructured loan renewals is not at a sign of weakness. Rather, it represents a rational strategy in a market that takes longer to recover than many had expected even a few months ago.