It is the second rate cut this year, and will benefit 180 thousand tracker mortgage holders.
The cut comes as headline inflation across the euro area continues to fall.
For those with €200,000 remaining on their mortgage, the rate reduction could result in savings of around €70 per month, or €840 per year.
AIB has already announced that it will adjust its tracker mortgage rates in line with the ECB’s policy and its contractual obligations to customers.
The ECB’s latest forecasts suggest that inflation across the eurozone will average 2.5% this year, gradually falling to 2.2% by 2025 and eventually dipping below its target of 2% in 2026.
However, the central bank also warned that price growth could temporarily rise again in the short term.
ECB President Christine Lagarde was tight lipped on the possibility of further rate cuts in October.
Although inflation has eased, the ECB emphasised that the battle against rising prices is far from over, particularly within the services sector, where wage growth continues to fuel price pressures.
