Irish interest rate cuts are unlikely to materialise in the near future, following the publication of new economic forecasts for Germany. Germany's six leading economic think-tanks trimmed their forecasts for Europe's powerhouse economy, denying Chancellor Helmut Kohl a sorely-needed boost ahead of September's general election and possibly putting a rate rise back.

The six institutes in their spring report revised their forecast for economic expansion this year to 2.6 per cent, down slightly from a previous forecast in October of 2.8 per cent. In 1997, the economy grew by 2.2 per cent.

Many commentators have been predicting a German interest rate rise, due to economic growth and to mark the advent of the euro. Such a move may have prompted a simultaneous rates' cut by the Irish authorities. They currently fear that a reduction here will persuade consumers to spend and borrow more but a move coinciding with a German rise might engender some caution.

However, the latest figures mean a short-term increase in Germany now appears less likely. And, according to Mr Jim O'Leary, chief economist at Davy Stockbrokers, a rate rise between July and September is also unlikely as the Bundesbank does not like to affect the electoral process.

Yesterday, Bundesbank council member Mr HansJurgen Koebnick said in the text of a speech that he saw no need to deviate from the Central Bank's current "steady hand" interest rate policy. He added that many market-watchers expected the Bundesbank to move on interest rates. "The Bundesbank, however, has never allowed itself to be led by market expectations," he said.

Irish interest rates do have to fall to German levels by the end of the year but many forecasters have been wrong-footed by the Central Bank's determination so far to keep rates high.

The symbolic rate cut which had been expected following the final decision on which countries will participate in the single currency has failed to emerge. Both the Spanish and Portuguese have already cut their rates but it is now unlikely that we will immediately follow suit. One reason is that the Irish economy is growing more strongly than either of these and credit growth is also substantially higher.

At the moment, it appears that those arguing for rate cuts to come as late as possible are holding sway. According to Mr O'Leary, a delay in rate cuts should also persuade more people to take out fixed rate mortgages. Most European loans are based on long-term fixed rates and thus mortgages there are far less sensitive to interest rate changes than those here.

Many observers believe that the Bank will wait for things to settle down and will hold out until late summer if it can. The bottom line would appear to be that the Central Bank is still, at least nominally, in charge of monetary policy and its brief is price stability.