WORRIES over European Monetary Union and further weakening of sterling on the foreign exchange markets could force the Central Bank to raise interest rates by the end of the year, according to Irish Intercontinental Bank (IIB).
Its senior economist, Mr Austin Hughes, yesterday predicted that the Irish authorities would move to raise interest rates in the second half of 1996. This increase in the short term could push long term interest rates up by as much as one percentage point.
"Given the market's recent mood, the realisation that rates have definitely begun an upward trend could provoke a sharp rise in long term Irish rates", he said.
Market concerns about proposed monetary union would cause periodic bouts of volatility across Europe and would leave the pound particularly vulnerable.
The target timetable for EU states to qualify to join EMU, Mr Hughes said, would begin to look "increasingly ridiculous" in the coming months. He said that with no clear alternatives in place, currencies such as the pound would be vulnerable.
