The European Central Bank on Thursday raised interest rates for the first time in 3 years, by 0.25%. The widely anticipated move comes amid concern that higher energy prices linked to the ongoing conflict in the Middle East may result in increased inflation across the EU.
The new deposit rate of 2.25% will be applicable from 17th June 2026 and represents the first increase seen since 2023.
Some analysts are predicting a further increase later this year.
The ECB said the decision is aimed at maintaining price stability and ensuring inflation returns to its 2% target over the medium term.
In Ireland, the first borrowers to feel the impact will be those on tracker mortgages, with some 100,000 mortgage holders expected to see repayments rise automatically in the coming weeks, as these rates move directly in line with ECB changes.
While tracker mortgage holders will experience the immediate effect, increases might also follow for variable-rate borrowers and those coming to the end of fixed-rate terms, depending on how their lenders respond in the months ahead.
The ECB has also revised its inflation forecasts upwards. It now expects inflation to average 3.0% in 2026 and 2.3% in 2027, up from previous forecasts of 2.6% and 2.0% respectively.
