Sir, - I never thought I would see the day when the management of our economy is reduced to hope, yet it now appears this is the situation. The head of the Irish Central Bank stated: "The Irish economy is out of step with the other euro economies, but you never know how they might converge". Considering that this man is tasked with guiding us into EMU, you might think he would know or, if he didn't know, that he might try to find out. Yet I can partially understand his apparent resigned attitude. The Government is surrendering his ability to control exchange and interest rates to the European Central Bank. We find ourselves with a frenzied economy that needs the brakes applied with higher interest rates, but the Central Bank cannot do this. In fact, it is forced to lower rates. Alan Greenspan, the current head of the American Federal Reserve, has stated that the function of a central banker is to take the punch bowl away just as the party is getting going. Our Central Bank is, however, obliged to lace the punch bowl with 80 proof vodka by reducing short-term rates by up to three per cent over the next seven months. In a last act of desperate prudence, the Central Bank will probably hold these cuts over until November/December in the hope of depriving the boom of oxygen. Few believe it will work and the effect of a two-three per cent cut in rates over a short period of time towards the end of the year will be dramatic. Of course the rational expectation from these cuts will be enough for some consumers who will adjust activity now in anticipation of the interest rate reduction. If it was not for our Government's desire to join EMU, our Central Bank could have this economy well under control. Instead we are heading for a strong bout of price inflation, further asset inflation (house prices), and, of course, ultimately a recession and house price collapse. The better the party the worse the hangover. - Yours, etc., Anthony Sweeney,
Ennis Road, Limerick.