The European Central Bank has raised interest rates for the third time in a row, signaling its intention to start withdrawing cash from the banking system to combat record-high inflation.
After being caught off guard by a sudden surge in prices as a result of rising energy costs due to Russia’s invasion of Ukraine and the uneven economic reopening after the Covid-19 pandemic, the ECB has been on the verge of falling within a few months of years. It has withdrawn an aggressive economic stimulus package.
The 19 central banks that share the euro have raised interest rates on bank deposits by 75 basis points to their highest level since 2009.
“We expect the Policy Board to take today’s decision and raise interest rates further to bring inflation back to 2% in a timely manner,” the ECB said.
Interest rate hikes could help keep home prices ‘calm’…
The latest increase means that someone with a tracker mortgage with €200,000 left on the loan will pay about €180 more each month compared to the beginning of the year. This equates to her €2,160 addition in 12 months.
If interest rates hit 3% next year, your monthly repayments could increase by nearly €300 a month, or nearly €3,600 a year.
“For now, all major banks have postponed raising their floating rates, and only the AIB has raised its fixed rates (only 0.50%). said Daragh Cassidy of price comparison site bonkers.ie.
“However, there is room for banks to absorb some of the ECB rate hikes for these customers, especially as Irish floating rates are under-priced. , almost guaranteed to raise fixed rates in the coming weeks.”