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EUROZONE INFLATION HAS hit a three-year low raising expectations that the European Central Bank may cut its main interest rate when it meets later this week
Inflation dropped to 1.2 per cent in April, the lowest level since February 2010, and down from 1.7 per cent in March keeping it well below the ECB’s target of near or below 2 per cent.
With the cost of living having steadily declined over the past year the fall in inflation and the rise in unemployment in the eurozone will put pressure on the ECB governing council to aid some mortgage holders and cut interest rates when it meets on Thursday.
A cut to the record low interest rate of 0.75 per cent is widely expected with many economists predicting that the rate will fall by 25 basis points, according to Reuters.
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… but will the banks pass on the rate cut?
Yes they will. They must increase the rate first for a few weeks before the cut kicks in reducing the rate to the same level it was last month. Only difference is banks get to borrow cheaper money.
Have not our banks already announced an increase?
so far AIB has , not sure about the rest of them
Watch ebs and their mates will bang up their rates again once this happens, absolutely sickening
What’s a tracker mortgage!
I don’t understand APR
A rate cut will hit tracker mortgages pushing them further below cost which our banks will have to compensate for with more current account fees, higher variable rate mortgages and will further increase the time until the taxpayer sees any bailout money… It’s giving with one hand and taking away with the other at this point.
But doesn’t it mean the rate is lowered for our banks paying back loans to the ECB? Maybe I’m wrong on this….
That was my understanding, although happy to be corrected.
Funny that got my letter today from ebs saying rate has gone from 4.33 to 4.58 . This country can go and f€€k itself .
Here’s a novel idea; the ECB should keep printing money; but rather than using it to shore up structural problems ( which doesn’t cause inflation ), they should print enough to maintain a EZ inflation rate of just over 2%. Inflation is too low in the EZ, it is hampering consumer spending and the probability of growth, and isn’t regulating inflation to stay at the most beneficial level one of the main functions of a Central Bank?
Inflation is TOO LOW???
You have to be kidding me. You must only care about the bankers and elite, not the poor and middle class.
Disgusting
Stop reading those Keynesian/Neoliberal econ books.
@ Michael – get away from the “me too”-ism and look at the bigger picture.
In times of very low inflation, there are very few incentives to spend your money, and a load of incentives to hoard your money. Normally, in times of low inflation, it makes far more sense to buy on credit rather than with cash.
Currently, however, there is a very understandable aversion to credit, both from people who would normally seek credit, and, more importantly, from those who supply credit.
So, low inflation + lack of credit sources = economic stagnation.
A higher level of inflation ( not a high level, but higher than the disastrously low level we have no ) would have the dual effect of getting money moving and reducing the weight of the debt.
High inflation will benefit debt-laden countries.
Absolutely none of the above has to do with Keynes, so I’ve no idea where you pulled that out of ( although I could be crude and suggest from where you pulled it ).
Low inflation is good for some ie people on fixed incomes, reduced pensions, reduced social welfare, those who have lost on bank shares and property. High inflation is good for the retail trade etc. Lets. keep inflation under control for the sake of those less fortunate with limited resources because they will suffer the most in times of high inflation. There has to be another solution to the problems being experienced by the retail trade which will be solved by growth and rising employment levels.
No inflation? Ok, let’s keep trying our current deflation approach. See you in a few million years when you’ve got that sorted.
@ Maurice – to be fair, we’re not talking about having high inflation. Two per cent is not high. While inflation would damage many people’s finances in one respect, I do believe a lot of the damage would be offset by the benefits in he mid-term.
As it is, we’ve seen a rise in the cost of living at the same time as the rate of inflation has been dropping, so, in this case, cost of living and inflation are not directly in proportion to each other.
Low inflation is a kiss of death for growth, and growth, including the jobs that go with it, what we desperately need.
Much as it makes me squeamish to agree with Censored, he’s on the money with his comment.
@ Censored – don’t worry, I won’t be making a habit of it :-)
So the answer to my original question is yes. I’ll use isms in context like I always have.
I don’t need to hear regurgitated rubbish from Krugman anymore please.
Tell me why deflation is a bad thing? Because it strengthens the value of money? Because it gives people induced incomes a chance? Why must we always crush the poorer amongst us?
You’ll come back at me with some academic answer, but the truth is that you logic is what is getting us deeper into this mess. 2007 is going to happen again soon
@ Michael – you’re a bit of a strange bird. You name-drop academic economists when it’s irrelevant, and then dismiss “academic”replies. Seems to be a low self-esteem issue going on.
I wrote above why I think low inflation is dangerous and a higher rate of inflation would be beneficial. You’re asking for an answer, but you don’t ask a question, so my original comments still stand.
Chucking insults and being snotty does not a convincing economic argument make. Maybe actually read up a little on the economists and economic movements you name drop?
Already have mortgage going up 40 euro a month from June
should legislate on a max difference between variable /tracker…at the moment people are paying up to 4or 5 points over.2 should be about fair..
what ya think.
have your say