No further cuts in ECB rates until 2015, predicts survey

No further cuts in ECB rates until 2015, predicts survey

THE European Central Bank may not cut its key lending rate again until the end of next year – a move that would be a blow for tracker mortgage holders.

A comprehensive survey of European economists has found that most do not expect another cut until at least 2015.

This month the ECB cut its lending rate to 0.5% in a move that will save 375,000 tracker holders around €30 a month on a €200,000 mortgage.

And last week head of the bank, Mario Draghi, said his organisation was ready to deliver another reduction.

The Frankfurt-based central bank will leave its main refinancing rate at its present level until the end of 2014, according to a survey of economists by Bloomberg news service.

The same survey shows that 27 of 32 economists predict no cut in the benchmark rate by the end of 2013, while five see a reduction to 0.25%.

Mr Draghi said last week he expects the euro-region economy to “gradually recover” in the second half of the year.

But he added that the “risks surrounding the economic outlook for the euro area continue to be on the downside”.

Such an outlook has helped fuel speculation that the ECB might cut its interest rate again.

Economist with Goodbody Stockbrokers in Dublin, Juliet Tennent, said the ECB may well cut rates again this year.

“The ECB has left the door open. If economic conditions deteriorate further in the eurozone then a rate cut is certainly on the cards.”

Under tracker contracts, lenders are obliged to pass on any reduction in ECB rates.

Banks can move variable rates in any direction, at any time.

 

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