asked the Minister for Finance if, in view of the Taoiseach's statement on RTE on 20 March, he has inquired why bank interest rates are still only halfway back to their pre-devaluation levels.
Written Answers. - Bank Interest Rates.
589.
The Taoiseach stated in the course of the interview referred to by the Deputy that the interest rates of the Associated Banks are determined with reference to the interbank market and that the rates in this market move in response to the supply of and demand for funds.
Since the EMS realignment there has been a reflow of foreign exchange which has contributed to some easing of domestic liquidity conditions and, accordingly, to a fall in interbank and Associated Bank interest rates. The prime lending rate of the Associated Banks fell by 1½ percentage points from the close of business on 20 April from 16¾ per cent to 15¼ per cent, more than halfway back to the former rate of 14 per cent which applied prior to 18 March. However, the foreign exchange outflows prior to the realignment have yet to be fully reversed, so that there are continued pressures on domestic liquidity and interest rates. To date there has not been sufficient scope for a further reduction in Associated Bank interest rates.