The Irish economy remains remarkably free of inflation despite the recent slide in the value of the euro against sterling, according to the President of the European Central Bank (ECB), Mr Wim Duisenberg.
While the ECB is closely monitoring the danger that the fall in the euro could make British imports more expensive and thus feed into inflation, "we have no indication of that happening", Mr Duisenberg said. "And I want to point out that Irish inflation is still under 2 per cent." Mr Duisenberg was speaking last night after a meeting of the ECB governing council left euro zone interest rates unchanged at 3 per cent.
He said he was not concerned about the fall in the euro, which has lost 8 per cent of its value since the common currency was launched two months ago. It weakened again yesterday, dropping below $1.08 in New York at one stage, before rising later to just above this level, still more than a cent down on the previous day's close.
Mr Duisenberg pointed out that the euro was now trading at the same level as the deutschmark did for much of last year. He suggested that the high level the euro reached just after its launch might have been exceptional and that it might now stabilise at a lower level.
"I am not concerned with the level the euro has currently reached. If the movement were to continue it could be a cause for concern," he said.
Analysts suggested last night that Mr Duisenberg's remarks could be interpreted by the financial markets as a sign that the ECB is adopting a policy of benign neglect towards the euro's exchange rate. Some were predicting further falls in the coming days.
The decision to leave rates unchanged came despite a slowdown in the German economy and increasingly strident calls for an interest rate cut from the German Finance Minister, Mr Oskar Lafontaine.
He argues that Europe needs the stimulus of lower interest rates to boost growth and create jobs. But Mr Duisenberg insists that cutting rates would do little to solve Germany's difficulties, which he puts down to deeper, structural problems.
Mr Duisenberg dismissed fears that Germany's economic slowdown could create deflation, with prices falling rather than rising. Taken as a whole, the euro zone showed no sign of either inflation or deflation, with prices remaining stable.
The dispute between the German Finance Minister and the ECB over interest rates has become increasingly bitter and some analysts think Mr Lafontaine's regular calls for a rate cut are to blame for the fall in the euro. Mr Duisenberg did not attack Mr Lafontaine directly last night but he made no effort to conceal his distaste for Mr Lafontaine's interventions.
"I must confess that I've heard him louder in the media than in direct contact," he said.