The European Central Bank (ECB) cut its key interest rate by 0.25 percentage points, with the policymakers at the bank saying their projections suggest that inflation will fall slightly over the coming years.

The rate cut is good news for borrowers, although recent comments from Irish lenders suggest that there isn’t huge demand among farmers for fresh loans at the moment.

With uncertainty particularly high among dairy farmers surrounding the future of the nitrates derogation, banks are seeing investment decisions being put on hold.

While Irish banks are not obliged to pass any reduction in ECB rates on to Irish borrowers - except in the case of tracker loans - the move by the central bank and expectations that there will be further cuts in the coming months means that a drop in borrowing costs in Ireland over the medium term is almost inevitable.

Returns

For farmers looking to invest, the interest cost is often not the main driver of a decision on whether to borrow or not. Instead, the decision should be driven by expected returns from the investment.

With farmers facing as much uncertainty as they are now, those calculations on future earnings are almost impossible to make.

Yes, the interest rate cut - and however many more there might be to come - are very welcome, but until farmers have some certainty about how much policy will constrain their business, they probably will keep additional investments to a minimum.