The ECB may cut interest rates twice this summer depending on wage growth

Wages are a key variable for policymakers as they decide how soon to lower interest rates. Picture: Arne Dedert/dpa via AP

European Central Bank (ECB) interest-rate setters are starting to position themselves for the next debate as a first cut in June becomes increasingly certain as inflation continues to slow.

The question the members of the Governing Council eventually need to settle is whether to follow their initial foray into monetary easing with another move at their July policy meeting, or wait at least until September.

Even if president Christine Lagarde downplays any talk of such a step after Thursday’s gathering, the discussion is already under way, according to Moody's Ratings.

The ECB continues to monitor wage growth as workers’ pay is a key variable for policymakers as they decide how soon and how quickly to lower interest rates.

Salaries are expected to rise 3.8% over the next 12 months, the ECB said on Monday in its Survey on the Access to Finance of Enterprises. That is down from 4.5% in the previous poll in November.

ECB interest rate cuts will immediately benefit tracker mortgage holders, however, customers coming off fixed-rate mortgages are set to see a jump in their repayments. Some lenders have reduced rates on some of their mortgage offerings.

Green mortgage rate cuts

AIB cut its interest rate on green mortgages across all its brands, including EBS and Green Haven.

The lender will reduce green mortgage fixed rates by 0.2% and the new rate will be available to both new and existing customers. Mortgage customers who own a home with an energy rating of B3 or higher can apply for this product.

Elsewhere, PTSB last month announced changes to its green mortgage customers and reduced rates for new customers on its four-year fixed-term mortgages.

Meanwhile, global oil benchmark Brent drifted lower on Monday but remained above $90 a barrel after Israel withdrew more soldiers from Gaza and committed to fresh talks on a potential ceasefire in the six-month conflict in the Middle East.

Brent crude futures were down 0.7%, to $90.55 a barrel. Oil prices gained about 4% last week on escalating geopolitical tensions.

Among the factors affecting oil's demand outlook, a US employment report on Friday suggested the economy ended the first quarter on solid ground, which could prompt the Federal Reserve to delay interest rate cuts this year.

Markets are currently pricing about 90 basis points of easing this year, compared to about 70 basis points for the Federal Reserve. That gap has reignited a debate on whether Europe can chart its own policy course or will ultimately be forced to follow the US.

• Reporting by Bloomberg, Reuters and Irish Examiner