European Central Bank expected to cut interest rates by 0.25%
The European Central Bank is expected to cut interest rates by 0.25% when its governing council meets today.
This will bring the main refinancing rate, which is used to price mortgages, from 3.15% to 2.9%.
The bank has been steadily cutting rates as inflation has declined from its peak of 10.6% in 2022.
If the reduction today proceeds it will immediately benefit tracker mortgage customers.
So far banks have generally not passed on rate cuts to variable mortgage holders but have reduced the price of new fixed rate products.
Surveys of economists have indicated they expect the ECB to continue to reduce the cost of borrowing over the coming months.
Economic growth among countries using the euro has also been subdued and lower rates usually helps boost growth.
However, future cuts will depend on inflation remaining near the ECB’s target of 2%.
Conall Mac Coille, chief economist with Bank of Ireland, said the markets see the ECB cutting rates to 2%.
But he cautioned “it all comes down to hitting the inflation target.”
At present inflation in the eurozone is 2.4% but has been rising over recent months due to higher energy prices and is up from 1.7% in September.
Goodbody Stockbrokers chief economist Dermot O’Leary said the ECB will also be watching potential “spending and trade decisions from the US”.
He said observers will be monitoring the ECB’s press conference to watch for any indications of geopolitical risks.
Martina Hennessey, CEO of mortgage broker Doddl, said if today’s cut proceeds, it will mean tracker mortgage holders with a €250,000 balance and a term of 15 years will have seen repayments fall by a total of €207 per month.
She said mortgage rates in Ireland have fallen by 1.5% as banks have “priced in forward rate expectations in recent months”.
Any reduction in rates will also put downward pressure on returns for savers who have seen recent reductions.
Article Source – European Central Bank expected to cut interest rates by 0.25% – RTE
