Sir, - In an article on interest rates in your paper on October 3rd I was quoted as saying that the level of Irish interest rate could fall by two per cent and that this would be a disaster for the economy. I would like to point out that these words were said in reply to the hypothetical question: What could happen to Irish interest rates if they were to converge completely with German interest rates?
It was never my intention to argue that interest rates were likely to fall by two per cent. Such a drop, could only occur if three conditions are met simultaneously. Firstly, overseas investors would have to continue piling money into Irish bonds (particularly at the shorter end of the curve) and the Irish pound. Secondly, the authorities would have to continue resisting an upward move of the punt by selling punts on the forex market.
The third condition is that the other two lead to the Central Bank completely losing control over wholesale money market rates. I consider it very unlikely that these conditions will be met at the same time in the foreseeable future. Irish wholesale money market rates are, thus, unlikely to fall by two per cent.- Yours, etc.,
Chief economist,
Goodbody Stockbrokers,
122 Pembroke Road,
Ballsbridge,
Dublin 4.