The Governing Council of the European Central Bank (ECB) is expected to leave interest rates unchanged when it meets later today.
The likely pause follows the decision to cut rates by 0.25% at the last meeting of the bank’s chiefs in June, the first reduction since 2019.
That brought the key deposit rate back down to 3.75% from the 4% it had been hiked to in an effort to get inflation in the eurozone under control and back down.
Euro area inflation in June was 2.5%, slightly down on the 2.6% the previous month and edging closer to the bank’s target of 2%.
However, there remains concern about ongoing upward price pressures, particularly in the services area where it remains high at 4.1%.
The bank is also concerned about the impact of rising wages on prices.
The ECB does not expect inflation to return to its target rate until next year.
ECB leaders have cautioned that the path to the normalisation of interest rates could be slow and would be data dependent on a month by month basis.
However, experts do still think it is likely that a further rate cut will follow at the bank’s next meeting in September.
Here, mortgage providers have already started to adjust the interest rates on some mortgage products downwards on foot of last month’s ECB cut and what is expected to follow.
However, because the banks and non-bank lenders did not pass on the full 4.75% of increases over the past two years, they are not expected to cut rates rapidly or necessarily in step with the ECB.
Martina Hennessy, founder of doddl.ie, said non-bank lenders are now cutting rates and re-entering the market.
She said new non-bank lenders like MoCo and Nua Money do offer slightly higher rates due to market-based funding, but she expects rate cuts from these new entrants as funding costs drop.
Another big influence could be Revolut’s anticipated entry into the mortgage market here next year which should boost competition and benefit consumers with its large customer base and technology, she added.
Article Source – ECB not expected to cut interest rates any further today – RTE
