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THE GOVERNING COUNCIL of the European Central Bank will meet today to discuss whether its main interest rate should be cut – in a move that would prove a major boost to mortgage holders.
The regular meeting in Frankfurt comes as worries continue about the ability of Spanish banks to remain solvent, and the potential for the Spanish government to require emergency funding of its own in order to support the banking sector.
Though some analysts – including Danske Bank last week – have predicted that the bank may cut its rates by 0.25 per cent, others consider it more likely that interest rates will not be adjusted until next month’s meething.
Reuters suggests that the bank will be keen both to act, but not to do so immediately – as if it does so, it may be seen as taking pressure off Europe’s governments to bring forward policy initiatives of their own.
The bank could therefore opt to stand by and observe the outcomes of the European Council summit of EU leaders in three weeks’ time – and potentially act then, by cutting its main rates.
Another 0.25 per cent cut to the rates – which would be the third cut since Mario Draghi took over as the bank’s president in November – would have the most obvious impact on the holders of tracker mortgages, who would see their rates drop accordingly within days.
It would have broader industrial impact too, however: the continent’s banks would be able to access cheaper funding from the ECB in order to pick up the pace of their day-to-day activities, and potentially free up the supply of credit to consumers and businesses.
The ECB would also then charge less interest on over €1 trillion of loans issued to the continent’s banks in the last six months.
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God bless tracker mortgages..
A small albeit welcome improvement.
I’d be surprised if they do cut them today, but please please please! Every little helps!
Sorry folks you won’t find it passed on by Irish banks. They will cite their increasing mortgage losses. They need to build up their profits to pay for this.
sad but true
The US two year depression 1920-21.
The US government & federal reserve responded to the post-war depression by savagely cutting spending, increasing interest rates and allowing failed banks to fail. In less than two years, their economy had returned to growth & unemployment was at predepression levels.
“To restore fiscal and price sanity, the authorities implemented what today strikes us as incredibly “merciless” policies. From FY 1919 to 1920, federal spending was slashed from $18.5 billion to $6.4 billion—a 65 percent reduction in one year. The budget was pushed down the next two years as well, to $3.3 billion in FY 1922.
On the monetary side, the New York Fed raised its discount rate to a record high 7 percent by June 1920. Now the reader might think that this nominal rate was actually “looser” than the 1.5 percent discount rate charged in 1931 because of the changes in inflation rates. But on the contrary, the price deflation of the 1920–1921 depression was more severe. From its peak in June 1920 the Consumer Price Index fell 15.8 percent over the next 12 months. In contrast, year-over-year price deflation never even reached 11 percent at any point during the Great Depression. Whether we look at nominal interest rates or “real” (inflation-adjusted) interest rates, the Fed was very “tight” during the 1920–1921 depression and very “loose” during the onset of the Great Depression.”
Freemanonline
change the rate to -25%.
that would give me an extra 400 per month.
if carlsberg did economics.
It not that far off what what should be done. When you look at the 1% interest rate for the 1.1 trn that the ECB gave to the banks at the start of the year, inflation running at 2-4% then the banks are in effect getting free money. It’s a real negative rate.
It’ll be like petrol prices. Small token gesture reduction to ease the pain before the big whack up!
have your say