ECB announces interest rate increase

The European Central Bank has announced today a second interest rate increase since April.

At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:

The interest rate on the main refinancing operations of the Eurosystem will be increased by 25 basis points to 1.50%, starting from the operation to be settled on July 13 2011.

The interest rate on the marginal lending facility will be increased by 25 basis points to 2.25%, with effect from 13 July 2011.

The interest rate on the deposit facility will be increased by 25 basis points to 0.75%, with effect from 13 July 2011.

The news will put more pressure on mortgage holders in the coming months.

Around 400,000 home-owners in Ireland with tracker mortgages will be immediately affected.

Business Editor Ian Guider said all eyes will be on the ECB President later to see if he signals further hikes this year: "For a typical mortgage holder out there; that's about €45 extra per month.

"It is the second increase this year and now all eyes are on Jean Claude Trichet to see if this is the last increase.

"It doesn't look like it I'm afraid. They (ECB) have put up interest rates because of inflation across Europe. They're fighting, they don't care about the economy, whether it grows or not.

"Inflation is well above their target I'm afraid and just means that another increase is probably likely later in September or October."