The European Central Bank has announced its widely expected decision to raise raised interest rates by a quarter of a percentage point to 3 per cent, the fourth increase since December.
Today's rate rise will add a further €34 to the average monthly repayments of homeowners, with the cost of a typical mortgage of €250,000 over 25 years set to rise to €1,333.
Borrowers on a typical tracker rate of 3.85 per cent have already seen €100 added to monthly mortgage costs as interest rates rose by three-quarters of a percentage point since December.
Inflation in the euro zone has been at 2.5 per cent, well above the ECB's 2 per cent ceiling, for the last three months, and turmoil in the Middle East is likely to keep oil prices under upward pressure.
The ECB said the interest rate on its deposit facility would also be increased, to 2.0 per cent, and the marginal lending rate would rise to 4 per cent.
The Bank of England surprised market earlier today by hiking its key rate 4.75 per cent, citing worries that rising growth could lead to upward pressure on prices.
The focus is now on ECB President Jean-Claude Trichet, who will hold a news conference at 1.30pm Irish Time.
ECB watchers are looking for hints on whether the ECB will stick to more rapid moves for the rest of the year by tightening credit costs in October and in December.
A slim majority of analysts in a recent poll predicted the ECB would raise rates twice more this year to 3.5 per cent. The remainder expected the bank to stop at 3.25 per cent before an expected slowdown in growth in 2007.