The latest European Central Bank (ECB) council meeting resulted in a quarter point rise, while some hawkish members were seeking a half point rise. To mollify the hawks, the ECB announced quicker run down of its Government bonds holdings, which could add some upward pressure on long-term interest rates but hopefully not add to jitters in the banking market. ECB president, Christine Lagarde, assured that more increases are on the way as there is still “more ground to cover.” This clear statement distinguishes the ECB from the US Federal Reserve, where the Chair, Jay Powell, hinted that US interest rates could have peaked. The ECB faces uncertainty regarding inflation figures in the euro zone in advance of the next ECB meeting, given the time lag between higher interest rates and their full impact. Political pressure is growing in Ireland to provide help for households affected by higher interest rates, with Sinn Féin leading the charge for targeted and temporary return of mortgage interest relief. However, temporary measures can become semi-permanent, and there are questions of fairness in terms of who gets help and who does not. Moreover, the ECB would argue that such relief could damage the pass-through of policies to bring down inflation. More cost-of-living measures and help for households are likely to be included in the budget, but whether there will be specific measures aimed at mortgage holders remains to be seen.
