A further cut in interest appeared to be closer yesterday after reductions in Spain, Portugal and Sweden.
All three countries cut their official bank lending rates by a quarter of a percentage point and it is expected that Ireland cannot hold out much longer.
The Bank of Spain led the final drive to get European interest rates in line in advance of the launch of the single currency in January.
It was followed later yesterday by the Bank of Portugal and the Swedish Riksbank.
The Spanish central bank caught markets off-guard with news it had set two tenders at a fixed 3.50 per cent for today, effectively cutting its key money market rate from 3.75 per cent
Many analysts had expected the Irish Central Bank to follow the same course of action on Monday and were surprised when it failed to deliver. But it can only be a matter of time now before it follows suit. The last rate cut was on a Friday and the bank is known to prefer to act going into a weekend. However, it may also wait for inflation data expected to be published on November 12th. This would make a Friday the 13th rate cut a likely option.
Irish interbank rates are now substantially above those in the other so-called peripheral economies. Spanish rates are at 3.5 per cent, Portuguese at 3.75 per cent and Italian at 4 per cent. Irish rates, on the other hand, are 4.94 per cent. Germany's repo rate is now at 3.3 per cent and that is the level other countries participating in monetary union must reach by January.
Some observers are still hoping for a rate cut this Friday but unless credit data, due to be published tomorrow, comes in below expectations this may be unlikely. But as Dr Dan McLaughlin, chief economist at ABN Amro, pointed out, the bank could find itself in trouble if the credit figures are higher than expected and inflation is disappointing. "It may have given a hostage to fortune by not cutting yesterday (Monday)," he added.
The Bank of Spain said it had cut rates to facilitate the gradual adjustment of credit institutions to how the European system of central banks will operate from the start of the third phase of monetary union.
