ECB now expected to leave rates untouched this month

ECB now expected to leave rates untouched this month

Economists now expect the European Central Bank to leave their rates untouched when they meet later this week.

It had been reported last week that the ECB was set to cut mortgage interest rates to a record low of 0.75% after Eurozone inflation dropped below 3% for the first time in three months in December.

While the ECB is still set to cut its rates to that historically low rate, experts now believe that the cut will not arrive until February or March.

The ECB meets again this Thursday and had been expected to cut its rates for the third successive month after cuts of 0.25% in November and December respectively.

However, the ECB is now expected sit tight after lowering rates twice in a row under new President Mario Draghi.

Homeowners on a €200,000 tracker mortgage – who automatically benefit from any ECB rate cuts – could save an additional €30 on their repayments were the rate to be reduced again. That would bring their overall savings since last November to €90 a month.

A number of institutions failed to pass on the ECB rate cuts to their variable rate mortgage holders before Christmas but another cut would add to the growing calls for them to pass on the savings to their customers.

At Thursday’s gathering of the ECB, markets will be keen to hear Draghi’s views on whether the ECB’s new cheap, three-year loans have eased credit conditions in the region. The ECB pumped almost half a trillion euro into Europe’s financial system last month, but data suggests banks are stashing most of it at the central bank rather than lending to each other.

Still, the move seems to have reduced expectations somewhat that the ECB will eventually cave in to pressure to print money and buy up government bonds from debt-laden euro zone states.

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