Irish interest rates are set to fall in the New Year, following comments from Bundesbank Council member, Mr Edgar Meister. Mr Meister stressed that euro interest rates would be low and thus the gap between German and Irish rates would have to be closed by Irish rates falling.

Irish Intercontinental Bank economist, Mr Austin Hughes, said the remarks would lead to a significant fall in Irish interest rates and in the pound early next year.

Irish inter-bank rates are around 6.25 per cent while those in Germany are around 3.5 per cent, implying a fall of up to three percentage points in Irish rates in the coming months.

Mr Hughes said it would be difficult for the Irish Central Bank to attempt to hold rates at a higher level than those in Germany for long.