Vol. 422 No. 4
54 Mr. M. Higgins asked the Minister for Finance if he will outline the steps, if any, he intends to take to ensure that interest rates can be reduced so as to encourage more investment and job creation; and if he will make a statement on the matter.
The Central Bank is the body with primary responsibility for interest rates in Ireland and it seeks to keep rates at the lowest level possible consistent with the objective of maintaining a firm exchange rate for the Irish pound within the narrow band of the European Monetary System. Over time, however, the level of interest rates in Ireland is determined by demand and supply conditions in the interbank money market and these conditions are, in turn, influenced by domestic and international factors which affect flows of funds into and out of the economy. For these reasons, Irish interest rates in general cannot deviate significantly from the level determined by market forces.
While domestic economic conditions warrant lower interest rates here at present, our position is determined largely by the interest rate levels of the currencies within the narrow band of the exchange rate mechanism of the EMS. The dominant currency is the Deutsche Mark and the German authorities continue to maintain interest rates at relatively high levels for their own internal reasons. This, in turn, means that rates are relatively high for other currencies within the band.
