THE EUROPEAN CENTRAL Bank has cut its interest rates by a further quarter percentage point.

The cut reduction comes as inflation eases and the eurozone economy struggles, with policymakers casting a nervous eye on US President Donald Trump’s protectionist agenda.

The central bank cut its benchmark deposit rate by a further quarter point to 2.75% today, its fifth reduction since June last year and a move widely expected by observers.

The ECB’s decision stands in contrast to the latest move by the US Federal Reserve.

In a statement announcing its latest decision, the ECB said the process of bringing inflation down was “well on track”, and the figure should return to the two-percent target “in the course of this year”.

It conceded that the economy was “still facing headwinds” but added that “rising real incomes and the gradually fading effects of restrictive monetary policy should support a pick-up in demand over time”.

The ECB reiterated that it would make its decisions based on incoming data, and it was not “pre-committing to a particular rate path”.

Responding to today’s ECB decision to cut its main refinancing interest rate by a further 0.25%, Brokers Ireland said the combined reductions since July 2022 are now significant for borrowers.

Mortgages

Rachel McGovern, deputy chief executive at Brokers Ireland said: 

“Tracker mortgage holders, those most immediately impacted, will now be down by 1.6% to 2.9% on where they were when the ECB reached the very high point of 4.5% in September 2023. This includes the 0.35% reduction. Tracker mortgage holders, depending on their individual contracts, pay an additional 0.50% to 1.25% on the ECB rate.

“This is a welcome relief,” she said, adding that “the unexpected and rapid nature of ten hikes in just over a year coincided with other cost of living increases and was financially stressful for many, especially those paying interest only and still facing having to repay the full face value of their loans”. 

“When you’re on a tight budget every increase adds pressure, not just financially but emotionally too.”

With reporting from AFP