The European Central Bank raises interest rates by 0.25%
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European Central Bank (ECB) introduced a 0.25% interest rate at its latest monetary policy meeting, despite inflation remaining stubbornly high.
This ECB hike represents the seventh rate increase introduced in less than a year in an effort to drive down sticky inflation. Accumulatively, the ECB has raised interest rates by 3.75% since last summer.
"The past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain," said the regulator.
Before the ECB announced its latest interest rate increase, figures from the Central Statistics Office showed the pace of annual Irish inflation cooled to 6.3% in April. However, both France and Spain recorded consumer-price gains.
Underlying inflation across the eurozone eased slightly for the first time in 10 months, which led to some analysts backing the case for ECB to slow the most aggressive interest-rate hiking campaign in its history.
Consumer prices, stripping out volatile items like fuel and food costs, rose 5.6% from a year ago in April — down from March’s record 5.7% advance.
Headline inflation rate ticked up to 7% though — a touch more than the 6.9% analysts anticipated and still far above the 2% target — but this did not spook ECB policymakers before their latest meeting.
At least two more interest rate hikes are expected this year while inflation remains sticky.
There are around 200,000 tracker mortgage customers which are the most exposed to the interest rate hikes enforced by the ECB.
Central Bank of Ireland data from earlier this year showed fixed-rate mortgages now constitute the majority of new agreements.
ECB staff previously said they now see inflation averaging 5.3% in 2023, 2.9% in 2024 and 2.1% in 2025 in the eurozone.
- Additional copy by Bloomberg