The Bank of England is to open an agency for Northern Ireland in Belfast to develop contacts with business. The bank's deputy governor, Mr Mervyn King, in a speech at Queen's University, Belfast, also hinted that the recent cycle of UK interest rate cuts may be close to an end.

Mr King said there had never been an agency office in Northern Ireland. The new office will increase its number of agencies to 13.

"The agency will increase our contacts with and knowledge of the economy and people of Northern Ireland," he said. The agencies' role is to maintain contact with a wide range of businesses and institutions, covering all sectors of the economy. Agents make a monthly report, which is used by the Monetary Policy Committee (MPC) to assess economic conditions. The bank's first agent in Belfast is Mr Nigel Falls, who has been agent in Bristol for six years. He said being in Northern Ireland would allow the bank to learn from the Republic's experience of the euro.

He added that regional agents made an important contribution to the Monetary Policy Committee's (MPC) regular interest rate judgements. "The Belfast office will complete the network," he said.

Mr Falls was the president of the Bristol Chartered Institute of Bankers in 1998/99. He has also worked as the private secretary to the deputy governor, as the bank's press officer and as agent in Glasgow. Turning to interest rates, Mr King said that, over the past three years, inflation had been held down due, in part, to the strength of sterling and lower world commodity prices. However, he stressed that those effects were only temporary.

He said that in the two years of the MPC's existence, it had probably led to higher output and lower unemployment, by bringing inflation expectations down towards actual inflation. A fall in inflation expectations had led to the lower-than-expected growth rates of earnings and prices.