Thomas Lyons 
The European Central Bank (ECB) has announced a further rate hike, warning households, businesses, and investors to expect more financial pain. ECB head Christine Lagarde unveiled a quarter-point rise, which was smaller than the half-point some economists had feared. However, she made clear that the ECB was not for “pausing” and that further action was on the way until it assessed that price pressures had been tamed. The rate hike came less than a day after the US Federal Reserve announced its own quarter-point rise, but left open the possibility that the US could soon enjoy a pause from further increases.
Ms Lagarde cited inflation staying “too high for too long,” adding that underlying price pressures, despite easing in recent times, remained strong. She noted that food price inflation was running at around 13% across the eurozone. “Inflation is still being pushed up by the gradual pass through of past energy-cost increases and supply bottlenecks,” Ms Lagarde said. “In services, especially, it is still being pushed higher also by pent-up demand from the reopening of the economy and by rising wages.” The eurozone economy was resilient, with the services sector strengthening, but manufacturing was facing worsening prospects, Ms Lagarde said.
Economist Austin Hughes warned that the hawkish wing of the ECB was winning out and that the ECB was “still looking out the rear window” and could go too far in its fight against inflation. Mr Hughes said the ECB was now in danger of damaging the eurozone economy. “For that reason, it will remain a bumpy second half for the eurozone, and a nervous one for Irish households,” he said, adding that he hoped the ECB would at least stop after two more rate hikes in the next two months.
Neil McDonnell, chief executive at business group Isme, said though he understood the imperative to fight inflation, rate increases themselves would contribute to inflation by pushing up house-building costs, and that landlords would be looking to increase rents. Michael Dowling, a leading mortgage broker, said the pain for Irish households was increasing further. On the back of Thursday’s rate hike alone, tracker mortgage holders on a €250,000 loan will soon face an increase of €35 a month, equivalent to €420 over a full year. Since the ECB started raising rates last summer, the tracker household is now paying €480 more in mortgage payments a month, equivalent to €5,760 more over a year, Mr Dowling said. Fixed-rate mortgage holders will face hefty increases when they roll off their current low-cost rates, he warned.
The ECB’s decision to continue raising rates has raised concerns among Irish experts about the consequences of further hikes. Mr Hughes warned that the ECB was in danger of damaging the eurozone economy and that the hawkish wing of the ECB was winning out. He said the ECB was “still looking out the rear window” and could go too far in its fight against inflation. Mr McDonnell said that while he understood the imperative to fight inflation, rate increases themselves would contribute to inflation by pushing up house-building costs, and that landlords would be looking to increase rents.
Michael Dowling, a leading mortgage broker, said the pain for Irish households was increasing further. On the back of Thursday’s rate hike alone, tracker mortgage holders on a €250,000 loan will soon face an increase of €35 a month, equivalent to €420 over a full year. Since the ECB started raising rates last summer, the tracker household is now paying €480 more in mortgage payments a month, equivalent to €5,760 more over a year, Mr Dowling said. Fixed-rate mortgage holders will face hefty increases when they roll off their current low-cost rates, he warned.
The ECB’s decision to continue raising rates has raised concerns among Irish experts about the consequences of further hikes. Mr Hughes warned that the ECB was in danger of damaging the eurozone economy and that the hawkish wing of the ECB was winning out. He said the ECB was “still looking out the rear window” and could go too far in its fight against inflation. Mr McDonnell said that while he understood the imperative to fight inflation, rate increases themselves would contribute to inflation by pushing up house-building costs, and that landlords would be looking to increase rents.
The pain for Irish households is increasing, with tracker mortgage holders on a €250,000 loan soon to face an increase of €35 a month, equivalent to €420 over a full year. Since the ECB started raising rates last summer, the tracker household is now paying €480 more in mortgage payments a month, equivalent to €5,760 more over a year. Fixed-rate mortgage holders will face hefty increases when they roll off their current low-cost rates, warns Michael Dowling, a leading mortgage broker.
Inflation is still being pushed up by the gradual pass-through of past energy-cost increases and supply bottlenecks. In services, especially, it is still being pushed higher also by pent-up demand from the reopening of the economy and by rising wages. The eurozone economy was resilient, with the services sector strengthening, but manufacturing was facing worsening prospects, according to Ms Lagarde.
The ECB’s decision to continue raising rates has raised concerns among Irish experts about the consequences of further hikes. Mr Hughes warned that the ECB was in danger of damaging the eurozone economy and that the hawkish wing of the ECB was winning out. He said the ECB was “still looking out the rear window” and could go too far in its fight against inflation. Mr McDonnell said that while he understood the imperative to fight inflation, rate increases themselves would contribute to inflation by pushing up house-building costs, and that landlords would be looking to increase rents.
The ECB’s decision to continue raising rates has raised concerns among Irish experts about the consequences of further hikes. Mr Hughes warned that the ECB was in danger of damaging the eurozone economy and that the hawkish wing of the ECB was winning out. He said the ECB was “still looking out the rear window” and could go too far in its fight against inflation. Mr McDonnell said that while he understood the imperative to fight inflation, rate increases themselves would contribute to inflation by pushing up house-building costs, and that landlords would be looking to increase rents.
In conclusion, the ECB has announced a further rate hike, warning households, businesses, and investors to expect more financial pain. The rate hike came less than a day after the US Federal Reserve announced its own quarter-point rise, but left open the possibility that the US could soon enjoy a pause from further increases. While the ECB’s decision to continue raising rates has raised concerns among Irish experts about the consequences of further hikes, Ms Lagarde made clear that the ECB was not for “pausing” and that further action was on the way until it assessed that price pressures had been tamed.
