The round of European interest rate cuts has continued, with a half-point reduction in British interest rates. A further fall in Irish interest rates is anticipated shortly, although analysts are divided on how soon it will happen.
The magnitude of the Bank of England cut - a reduction to 6.75 per cent - shocked the market.
Most analysts expressed surprise that it would opt for a half-point cut when all the previous raises were in quarters. "This could mean they know something they are not disclosing," one analyst said. "In any event they are conceding that the June rate hike was a major policy error."
However share prices slipped in London, due to concerns that the Bank of England was worried about recession. The benchmark FTSE-100 index of leading shares fell 143 points or 2.5 per cent. In Dublin, the ISEQ index dropped 1.64 per cent.
The German and French central banks yesterday held their key interest rates at 3.3 per cent.
The Bundesbank, Germany's central bank, ignored pressure from the new centre-left government to boost the economy by lowering its rates, despite the presence of the new Minister for Finance, Mr Oskar Lafontaine, at the meeting.
Last night the Bundesbank president, Mr Hans Tietmeyer, said that while central banks must be open to policy debate, political pressure was unacceptable.
Here, a slight slowdown in the rate at which banks and building societies are lending out money has persuaded some analysts that an interest rate cut is imminent.
Mr Austin Hughes, economist at Irish Intercontinental Bank, said the slight moderation in the rate of credit growth from 24.6 per cent in August to 23.4 per cent in September means there is a strong chance of a rate cut today or Monday.
However, the delay in publication of the monthly inflation data for October - originally due next Thursday but now scheduled for a week later due to technical problems at the Central Statistics Office - will mean that clear evidence of lower inflation will not be available to the bank until that date.
Residential mortgage lending was up 18.9 per cent year on year in September compared with 20.7 per cent in August.
