Ground Floor:Nobody was taken by surprise by the European Central Bank's (ECB)recent rate hike, which was well signalled to the markets.

Overall, the bank has brought rates from a record low of 2 per cent to a rather less generous 3.5 per cent in exactly a year.

A month previously, the bank's governing council had decided it wouldn't add to October's rate rise but would continue to be vigilant (its favourite buzz word), to ensure inflation expectations remained "solidly anchored" at levels which it felt were consistent with price stability. Obviously the council's vigilance in November made it feel that the anchor wasn't quite as firmly lodged as it would have hoped, so its Christmas present to the euro zone was another quarter-point increase.

Nevertheless, the ECB mandarins don't feel as though they're acting like Scrooge, despite the sixth rate increase in 12 months. In fact, they reckon they're still in Santa Claus mode because they indicated that, notwithstanding the 3.5 per cent tag on borrowing, policy continues to be rather accommodative.

Most traders are betting on at least one further rate rise before the ECB decides that enough is enough, although there is a concern that the appreciation of the euro (or possibly more precisely the depreciation of the dollar) might give the central bankers pause for thought.

Nobody in the euro zone is too happy about the idea of a strong euro/weak dollar combination because it makes our exports more expensive and gives the insular Americans yet another excuse not to set foot outside the US. Every time this happens, euro zone politicians come over all wobbly and start to panic about the imminent decline into which Europe is about to fall.

But, in fact, the euro zone has been behaving less like a fragile Jane Austen heroine and a little more Colin Firth in a wet shirt - rather robust and pleased with itself, albeit in a slightly embarrassed way, and less inclined to get a touch of the vapours at the notion of a stronger currency.

Trade within the euro zone has been increasing, although old Europe is still somewhat creaky and there are concerns regarding the effect of Germany's impending VAT increase on consumer confidence there.

It's difficult not to have sympathy for the Germans. For so long the powerhouse of Europe, they had turned into a nation of cautious savers. Then, just as they take their wallets out of their pockets thanks to an improving economy and the World Cup feel-good factor, they're whacked with an increase in VAT to 19 per cent.

Pre-VAT hike purchases means that German retail sales have been growing at their fastest rate since May, while the economy is expanding at its fastest pace in six years. But the VAT increase takes place in January and most people expect a fall back then. The potential fall-out from the VAT increase has probably also muddied the waters for the ECB forecasters.

Years ago, before Ireland moved out of the age of gentility and into Celtic Tiger mode, rate hikes would have had us burying our heads in our hands and worrying about the future. And while the media has pointed out the effect that cumulative rate increases are having on a country where everyone wants to be a property owner, it is also the case that real interest rates are about zero and the cost of borrowing continues to be incredibly inexpensive.

So neither this rate increase nor a further one would be expected to damage our economic prospects seriously.

Nevertheless, there's a general view that too much tightening wouldn't be a good thing. Consequently, the analysts pored over ECB president Jean-Claude Trichet's press statement to see if the bank really was shying away from the idea of further hikes.

Trichet himself was giving nothing away and his comments were as opaque as always. But when he was asked whether the ECB might raise rates by next February, he said that interpreting his comments that way "would not be correct".

The upshot of that was that most people now think the next rate hike will come in March next year, thus giving the ECB time to assess the level of the exchange rate (which it is not obliged to care about) and the level of inflation (which it is).

That gives Irish mortgage holders - and potential mortgage holders - a window in which to look at their post-festive finances to see whether the new year will be spent in a slightly more frugal mode than the last one.

It's hard to imagine Ireland as a land of frugality any more - we are, after all, expected to be the biggest spenders in Europe this year. Deloitte's annual consumer survey suggests that the average household will fork out €1,339 over the festive season, which is double the European average and an increase of about 10 per cent over last year's consumerfest.

By contrast, the once superior American household will only be spending €1,299, while that other confident euro zone country, Spain, will shell out just €904 per household.

Rate hikes or no rate hikes, the Irish are more confident about their domestic economy than any other country in Europe. Half of us still think next year will be even better than this year, regardless of the cost of borrowing.

Until then, the electronics retailers seem to be the ones with the most to look forward to as we load up the shopping bags with DVDs, CDs and other technological gifts, which seem to be at the top of every child's wish list this Christmas. Those tiger cubs know exactly how to spend their parents' money (thus preparing themselves to become the consumers of the future) but it's a far cry from the book token and selection box that were once the pinnacle of our expectations!