The European Central Bank (ECB) is likely to leave rates unchanged this month and signal an increase in June, Bank of Ireland chief economist Dan McLaughlin said today.
Dr McLaughlin also said he expects the Bank of England to announce a quarter point increase in official sterling rates, taking the bank rate to 5.5 per cent.
"The Bank of England's decision looks clear-cut, although it has to be said that the Monetary Policy Committee has surprised of late and appears to be split on fundamental grounds.
Dr McLaughlin said economic growth in the first quarter appears to have been weaker than forecast by the Bank of England, so he retained the view that 5.5 per cent may turn out to be the peak of the UK rate cycle.
"If this view becomes more widespread sterling would suffer, and we expect the UK currency to drift back below the $2 mark over the next few months."