Investor/An insider's guide to the market: Last week, the Bank of England (BOE) and European Central Bank (ECB) decided to leave their official interest rates unchanged at their monthly rate-setting meeting.

This was the 22nd consecutive month where the ECB governing council left rates unchanged at 2 per cent.

Most analysts regard the ECB as keen to start raising interest rates from their historically low levels as soon as possible. Last month, Trichet made it clear that the next move would be upwards but, after last week's meeting, he revealed that an increase in rates had not been discussed by the governing council. This suggests that the current economic soft patch has deferred any rate rise until much later in 2005.

The BOE also kept its official repo rate on hold at 4.75 per cent at its monetary policy committee (MPC) meeting for the eighth month in a row. Economic data has turned out to be weaker than expected and, with voters going to the polls in May, it was easy for the MPC to forego a potentially controversial rate rise.

The BOE has increased short-term interest rates slowly but surely over the past 18 months. The repo rate was 4 per cent one year ago, having risen from 3.75 per cent in mid 2003.

Unlike the core euro-zone economies, the UK has been growing strongly for several years. The MPC became worried about the rampant housing market and buoyant consumer spending.

There is growing evidence that the MPC's monetary tightening is working. Residential house prices have come off the boil and recent data indicate that house prices may have fallen slightly in February. Mortgage approvals have also fallen over the past nine months.

The pace of growth in consumer spending has also slowed over the past 18 months.

The May meeting of the MPC has been postponed by 48 hours to avoid a clash with the UK general election. This meeting will feature the next inflation report and many analysts view the meeting as the most likely one for a rate rise to 5 per cent. The experts are evenly divided between those expecting a quarter-point rise and those that believe rates have peaked at 4.75 per cent for this cycle.

Meanwhile, the Irish economy continues to go from strength to strength. Real annual economic growth of 5 per cent is way above the European average and the economy seems set to enjoy this rate of growth in 2005 and 2006.

Housing output in 2005 is expected to match the record number of units produced last year. House prices continue to climb but at a slower pace.

The relatively high UK interest rate highlights the disconnect between Irish interest rates and Irish economic growth. If the Republic was not part of the euro zone, rates would be much higher than current levels.

Irish rates will continue to be determined by the performance of core Europe, namely Germany, France and Italy. As long as these economies struggle to reach their potential growth rates, euro interest rates will only rise marginally, if at all. The Irish economy is, therefore, going to continue to enjoy low interest rates for the some time.

For observers of the Irish economy and the Irish stock market, there is an underlying concern as to what will happen when interest rates eventually rise. With no historical precedent to go on, it is impossible to predict whether a significant rise in interest rates would seriously damage the economy.

The good news is that the prospective rise in interest rates is likely to be very modest, and the date of the first rise would seem to have been deferred yet again because of weak growth in the core euro-zone economies.