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The Euro sign outside the ECB in Frankfurt Alamy Stock Photo

European Central Bank cuts interest rates by quarter percent point

The decision marks the fourth meeting in a row that the ECB has reduced borrowing costs.

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  

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18 Comments
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    Mute Orban Orban
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    Jan 30th 2025, 1:48 PM

    They increase them within days once there is an increases but very slow to bring them down!

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    Mute Paul O'Mahoney
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    Jan 30th 2025, 2:05 PM

    @Orban Orban: This is rubbish as the ECB sets when the rates are effective. This is on the ECB website and its a few days . My bank are normal 2 weeks after this informing us and reduction next month, exactly the same when they went up.

    If you experience anything different call your bank for explanation.

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    Mute Alan d
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    Jan 30th 2025, 2:32 PM

    @Orban Orban: That is wrong your comment . You should contact your bank

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    Mute Dramafree 2023
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    Jan 30th 2025, 8:17 PM

    @Paul O’Mahoney: mine went up with every increase on a variable but has not come down even 0.01% I have contacted the bank and they said reductions for tracker only

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    Mute Paul O'Mahoney
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    Jan 31st 2025, 12:49 AM

    @Dramafree 2023: appeal

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    Mute Vectorsector
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    Jan 30th 2025, 1:43 PM

    This is all a load of boll0x. The rates the banks are charging here are no where near this. We’re in the process of renewing and everything we’re being offered is at least another full percentage point above this – fixed or variable. Don’t know what others experience is.

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    Mute Paul O'Mahoney
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    Jan 30th 2025, 2:00 PM

    @Vectorsector: Banks charge a margin of about 1% in most cases. There’s another .75% is coming, and that’s it, fixed rates should be dropping in line with this reduction, but if you can get a fixed rate about 3% that might be a very good deal.

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    Mute Eoin Jackson
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    Jan 30th 2025, 4:59 PM

    @Vectorsector: yes because the ECB rate will nearly always be the intra bank rate. The banks need to make a margin too so usually have 0.75% – 1% higher rates than the ECB rate. It allows banks to borrow money from each other and lend that money out and make a profit. Has always been the case. Kind of the underpinning of the banking sector that everyone’s mortgage rate is ECB rate + bank margin.

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    Mute Kevin
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    Jan 30th 2025, 2:43 PM

    Don’t know why they bother. 5 cuts over last 7 months and my mortgage rate hasn’t budged. Banks creaming us all while posting massive profits.

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    Mute Paul O'Mahoney
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    Jan 30th 2025, 2:52 PM

    @Kevin: Well if you’re on a variable or tracker that can’t be right, are you fixed? Or with Pepper etc?

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    Mute Kevin
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    Jan 30th 2025, 4:26 PM

    @Paul O’Mahoney: I’m on a variable rate – and it hasn’t changed

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    Mute Paul O'Mahoney
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    Jan 30th 2025, 4:45 PM

    @Kevin: That can’t be correct unless there are other issues in the background. Your mortgage is variable. If you don’t have issues, I suggest you ask your bank formally, and then if they don’t correct or explain why? Then, FSBO, if you’re still not getting what you’re due.

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    Mute Orban Orban
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    Jan 30th 2025, 1:48 PM

    They increase them within days once there is an increase but very slow to bring them down!

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    Mute Kevin O Brien
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    Jan 30th 2025, 2:57 PM

    Can FG as their x member banking federation chief Brian Hayes to pass on the cut this time and not use it for profiteering

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    Mute Kevin O Brien
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    Jan 30th 2025, 3:01 PM

    Banks use these cuts to increase profits x fine gael man Brian hayes is chief of banking federation well done FFG voters

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    Mute Paul O'Mahoney
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    Jan 30th 2025, 3:07 PM

    @Kevin O Brien: Well the banks were making more money on overnight deposits with the ECB that from their mortgage books . Margins are so poor here that everyone else left.

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    Mute Paul O'Mahoney
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    Jan 30th 2025, 3:22 PM

    @Paul O’Mahoney: And should have mentioned that there are approximately €160bn on ordinary deposits in Ireland, most banks pay nothing on those or very little…..that’s why they are really making the profits. Yes there are alternatives online but they are not attractive online.

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    Mute Paddy C
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    Jan 30th 2025, 10:37 PM

    About time people are being hammered with interest on mortgages and others can’t afford to pay one if they can get it in the first place. Ecb rate only harms those with debt those without won’t stop spending so it hits those in debt moreso than those without that’s why it’s taken forever to slow inflation and its slowing down borrowing which has a mnock on effect.

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