NCB favours further cut in interest rate

 

THE Central Bank should follow the next cut in German interest rates, thereby allowing the current round of retail and mortgage cuts to be extended to all the major financial institutions", according NCB Stockbrokers.

While NCB expects this to be the last cut by the Bundesbank, the brokers feel that Irish rates can continue to fall under the influence of strong capital inflows, thereby narrowing the differential over short German rates.

However, NCB notes that, while this will possibly spark a second round of cuts in Irish retail interest rates, these would be limited to a quarter of one per cent.

After growing by nearly 7 per cent in both 1994 and 1995, NCB, in common with other forecasters, is projecting a slowdown in the growth in the economy to 4.5 per cent this year.

The inflation rate is forecast to fall to an average of 2 per cent (from 2.4 per cent) in 1996, reflecting the impact of mortgage rate movements and underlying inflation.