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Surprise! ECB cuts interest rate to 1.25 per cent

On his first day in the job, ECB president Mario Draghi surprised everyone by cutting the eurozone’s main interest rate.

Image: LUCA BRUNO/AP/Press Association Images

THE NEW EUROPEAN Central Bank (ECB) president Mario Draghi has marked his first meeting of the policy-making governing council by deciding to cut the main interest rate by a quarter point to 1.25 per cent.

The move has surprised markets which were expecting the ECB to hold rates steady at 1.5 per cent. Former president Jean-Claude Trichet already increased the rate twice this year.

The move is seen as a measure to calm markets which have been in turmoil over the uncertainty created by the situation in Greece.

Currently eurozone inflation stands at 3 per cent which is well above the ECB’s target of close to below 2 per cent, BBC News reports.

The change will come into effect from next Wednesday.

RTÉ’s economics correspondent Seán Whelan reports that the cut could offer a €11 and €15 per €1,000 reduction on a 25-year tracker mortgage.

Speaking on RTÉ’s News at One, the Minister for Finance Michael Noonan welcomed the cut, and advocated a further slashing of interest rates by as much as 0.5 per cent in the coming months.

Read: What challenges face the new ECB chief?

About the author:

Hugh O'Connell

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