ECB cut: Good news for borrowers but will there be more?

The news that the European Central Bank has cut interest rates for the sixth time in the past 12 months is a positive development for Irish consumers and businesses.

The quarter of a point cut brings rates to 2.5%.

It means tracker mortgage customers will immediately see a benefit of €15 for every €100,000 borrowed on a loan with 15 years yet to run.

There will also be downward pressure on other loans too.

However, any rate cut means lower returns for savers.

The ECB had been expected to continue to reduce borrowing costs to 2% this year.

But at a press conference the bank’s president, Christine Lagarde, said the landscape was now clouded by “huge uncertainty”.

Inflation in the eurozone has been falling and now stands at 2.4%.

It is edging closer to the ECB’s target of 2%.

However, the bank is clearly concerned about rising energy prices which could create problems and add to the cost of living.

Christine Lagarde raised the possibility of the ECB pausing its rate cutting programme if inflationary pressures resurface.

Another factor is the looming trade war with the US.

Last week US President Donald Trump threatened tariffs of 25% on goods from the EU and said a final decision will be made early next month.

Any additional duties are likely to be met with retaliatory import taxes by the EU on products from the States which could also add to inflation on this side of the Atlantic.

A trade war could also damage economic growth.

Put simply, it’s not clear what the ECB is going to do next.

Christine Lagarde said the bank’s governing council will move ahead on “meeting by meeting” basis.

Against this uncertain backdrop the Central Statistics Office published its latest snapshot of the Irish economy.

It said the domestic economy grew by 2.7% and wages rose by 2.9% last year.

Personal spending on goods and services rose by 2.3%.

That is robust.

But the bigger question is how the Irish economy will fare in 2025 with the prospect of a damaging trade war between the EU and the US.