ORGANISATIONS representing industry have continued to register their opposition to an increase in interest rates and yesterday the Small Firms Association accused the Central Bank of "flying in the face of reality" in its apparent support for a rise in rates.

SFA director, Mr Brendan Butler, said there was no clear evidence of increased inflation in Ireland and added that the current 1.4 per cent inflation rate was the lowest in Europe. "All our other economic indicators are also positive with one exception the punt/sterling relationship."

Arguing that the policy of the Central Bank in supporting an interest rate rise was "premature and unwarranted", the SEA director said this policy was damaging Ireland's credibility domestically and internationally. He said if the major concern of the Central Bank was the housing market, then there were means of addressing this situation other than through an interest rate increase.

And suggestions that the real preoccupation of the Central Bank was exchange rates rather than inflation have been supported by NCB economist, Mr Dermot O'Brien. Mr O'Brien said the coincidence of a rise in the pound's trade weighted value and a rise in money market rates "is highly suggestive that the currency, rather than credit growth, is the target of the bank's activities".

Mr O'Brien said the rationale behind this policy was EMU related, in particular the requirement that aspirant currencies should have remained within the "normal" band of the EMS for a period of two years before examination.

He said the absence of any rise in the Central Bank's own short term interest rate, the STE, reflected this policy. "Central Banks tend to adopt a low profile when they are trying to achieve something in the forex market."

Fianna Fail has also lent its support to the campaign against a rise in rates and finance spokesperson, Mr Martin Cullen, said yesterday there was "absolutely no need for their banks and other lending institutions to increase their interest rates".