The European Central Bank (ECB) has raised its three key interest rates by 0.25% to their highest levels in more than 20 years. The ECB’s “main refinancing rate” which dictates the cost of borrowing across much of Europe, including for people with tracker mortgages in Ireland, will rise from 3.75% to 4% in June 2023. The governor of the Central Bank of Ireland has already said another increase next month is “probable”.
When making decisions about interest rate changes, central bank officials keep a close eye on price inflation figures because they use rate changes to slow the flow of money into the economy. This is supposed to control rising prices by curbing demand for goods and services. Budgets are tighter so people buy less, or so the theory goes.
