Whether the Central Bank will hold interest rates steady until the end of the year, allowing a single large drop to the levels prevailing in the rest of the euro zone, or whether it will reduce them in a series of smaller steps over the final quarter remains a matter of debate.

Although many market-watchers believe the bank would be happy to delay the decision until December, for Ireland to maintain a substantial interest rate gap with other prospective euro members until the eve of EMU could raise awkward questions about Irish suitability for participation in the whole project.

Some analysts now believe there is a strong possibility that a cut could be co-ordinated with a Bundesbank rate rise following elections in Germany in September with further cuts following at steady intervals. The extent to which the Central Bank will have to cut rates is not clear at present and depends in large measure on how hefty any German rate rise might be. Mr Oliver Mangan, bond economist at AIB, believes the Bundesbank may decide to raise its key market rate, the repo rate, by 30 basis points which would leave market rates across the euro region at 3.6 per cent.

To reach this level, Irish rates would have to fall by 2.6 percentage points, but economists do not see this happening in one fell swoop. Instead, a series of cuts over the fourth quarter of 0.6 percentage points, followed by two cuts of 1.0 percentage point each perhaps is regarded as more likely.