AN INVESTOR'S GUIDE: As long as European economic growth is strong, the tendency will be for the ECB to raise rates - if the European economy remains strong well into 2008, the ECB could still be raising rates this time next year.

Official interest rate policy has been high on the agenda this week, with news coming from the Federal Reserve, the European Central Bank and the Bank of England. Naturally, the focus of attention tends to be on the most recent policy moves of the leading central banks, with even more intense focus on those statements that provide hints of future moves.

As a result the longer-term perspective gets lost among the minutiae of current conditions. Croesus has been examining some longer-term charts of interest rates and bond yields going back to the 1980s in order to assess what implications these longer-term trends could have for future interest rate developments.

A striking feature of the last five years is by how much short-term interest rates have risen since their low points. At end-June 2003, the Fed Funds rate stood at just 1 per cent and the Euro Repo rate was 2 per cent with the Yen Overnight Call rate at zero.

Even more striking is how low these rates were in a 20/30-year perspective. It is therefore clear that a significant portion of the rise in short-term rates during the current upcycle represents the withdrawal of "emergency" rate reductions and a return to normality.

The much more modest rise in bond yields since mid-2003 gives a much better sense of the scale of monetary tightening over the past four years. At end-June 2003, the 10-year Treasury bond yield was 3.57 per cent, just about a percentage point below the current yield of 4.62 per cent. The rise in the German 10-year yield is even less pronounced with the current yield of 4.2 per cent just 40 basis points higher than the end-June 2003 yield of 3.8 per cent.

Analysis of the chart of the yield on US Treasurys since 1984 shows that there was a strong long-term downtrend up to 2003. Yields of over 12 per cent in 1984 had declined to about 8 per cent by 1986 and to less than 6 per cent by 1992.

Since 2002 yields have traded in a narrow range around 4 per cent. One clear conclusion that Croesus draws from this analysis is that the long-term trend of falling global bond yields that began in the early 1980s is now over. How high yields go from here depends on how the current economic cycle evolves given that the longer-term factors which persistently drove yields lower during the 1980s and 1990s NO LONGER APPLY.

The implications for short-term interest rates are that the eventual peak in rates will be a function of the strength of the current economic cycle.

Croesus has long been curious as to how the consensus of economic opinion could be so confident that the Euro Repo rate would peak at no higher than 4 per cent. More recently this consensus has shifted to a view that this rate will now peak at 4.25 per cent later this year.

Croesus's crystal ball is no better than anyone else's, but as long as European economic growth is strong, the tendency will be for the ECB to raise rates. The longer-term trends in interest rates and bond yields, combined with current economic strength, particularly in Europe and the emerging economies, points to the possibility that interest rates could keep rising for longer than is currently anticipated.

C&C RESULTS

A number of Irish quoted companies released financial results or issued trading statements this week.

Drinks group C&C announced full-year results that were broadly in line with market expectations and also announced a €150 million share buy-back programme.

Reflecting ongoing strong cashflow generation, the final dividend is to be increased to 15 cent per share to bring the total dividend for the year to 27 cent, which is an 80 per cent increase on last year's payout.

The key to C&C's performance is its Bulmers and Magners cider brands, which now account for approximately 80 per cent of the group's operating profit.

The phenomenal initial phase of growth in the Magners brand is now over and, reflecting this, the shares have come back from their highs of €13.90 over recent months.

However, there is still room for substantial market share gains in Britain and, with summer about to start, the shares could have a seasonal run, particularly if we get a hot summer in Britain and Ireland.