ECB expected to increase interest rates

The European Central Bank is widely expected to increase interest rates by a quarter of a percentage point later today, bringing its main rate to 2.5%.

The bank is likely to take the step in response to rising inflation mainly driven by higher oil prices.

Inflation among countries using the euro is 3.3%, which is well above the ECB's target of 2%.

That means the bank is almost certain to increase interest rates for the second time this year.

The move will automatically affect tracker mortgage customers whose repayments will rise by €13 per month for every €100,000 borrowed.

It will also put upward pressure on other mortgage rates over time.

But savers who shop around may be able to benefit from higher returns as some financial institutions are likely to pass on the increase in future.

Remarks by the ECB's President Christine Lagarde will be closely watched for guidance about any future increases.

The steady increase in oil prices will also be a factor in the ECB's calculations as the price per barrel broke the $100 per barrel threshold again this week as the Iran conflict has escalated in recent days.