At the scheduled monthly meeting of the ECB yesterday, Mr Mario Draghi revealed that there had been an “extensive” discussion on interest rates at this month’s policy meeting and reported for the second consecutive month that a decision to keep the benchmark rate at 0.75pc was not unanimous.
He said that the ECB was studying the economic climate closely because there was no certainty the eurozone economy would pick up. “We will assess all the incoming data in the coming weeks and we stand ready to act,” said Mr Draghi.
In short, Mr. Draghi gave the strongest hint yet that he is preparing the ground to introduce a rate cut. It is less than one month since Ms. Christine Lagarde, Head of the IMF said that “monetary policy should remain accommodative, and we believe that there is still some limited room for the ECB to cut rates further,” in a speech given here in Dublin.
Seasoned ECB watchers said that a cut of .25% now looks more likely.
A rate cut would bring significant relief to mortgage holders here in Ireland.
For mortgage holders, the vast majority of who have variable interest rates (both tracker and standard variable), each quarter percent cut in interest rates pushes down monthly repayments by approximately €15 per €100,000 borrowed.
If the ECB does cut rates, it is imperative that both Government and the Central Bank officials apply extraordinary pressure on commercial banks to pass along the full value to standard variable rate to their (SVR) customers. Both the Government and Central Bank have been battling commercial banks to get mortgage arrears under control and reducing the cost on mortgage repayments is one way of achieving this.