independent

Thursday 17 April 2014

Rate cut boost for tracker mortgages is likely

European Central Bank  President Mario Draghi
European Central Bank President Mario Draghi

HOMEOWNERS with tracker mortgages could get another boost amid intense speculation of another interest rate cut by the European Central Bank.

The Frankfurt-based bank meets on Thursday with another surprise slip in the rate of inflation and upheaval in emerging markets topping its agenda.

Some analysts are suggesting that another interest rate cut from the already record low of 0.25pc could be on the cards in the coming months, providing a boost to homeowners on tracker mortgages here.

VOLATILE

The euro dropped to a two-month low as expectations grew of action by the ECB to stem the threat of deflation.

ECB head Mario Draghi last month appeared to dampen expectations of another rate cut, insisting signs were emerging of a dramatic improvement in the health of the European economy and played down fears of deflation in the eurozone.

But that was before the rate in the 18-member bloc unexpectedly slipped 0.1 percentage points to 0.7pc last month.

Importantly, core inflation, which excludes the more volatile food and energy prices, failed to show any significant rebound, rising to just 0.8pc.

Some experts are also suggesting that the Frankfurt bank may look at other actions beyond a simple rate cut, such as buying sovereign bonds, to loosen monetary conditions.

Inflation in the eurozone is expected to be 1.1pc this year and 1.3pc in 2015 – far below the ECB's target of 2pc.

Irish Independent

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