A DISTINCT frostiness has set in between the occupants of the Department of Finance in Merrion Street and the guardians of the currency in the Central Bank in Dame Street.

The Bank's decision to increase interest rates caught the Government by surprise. There appears to have been some toing and froing between the two sides before the announcement was made, but the Bank then "informed" the Government of its decision to push up its official rate by half a percentage point.

While the Bank is independent in setting interest rates - and in conducting exchange rate policy which is set by the Government - it would normally avoid increasing rates at a politically-sensitive time, such as the run up to an election or a budget.

The last thing that Ministers need as they head out on the canvass is home-owners worried about the rate increase and concerned that another might be on the way.

It is unlikely that either the rate increase or the opinion polls will deflect the Government from its June election plans. Although if pressure were to build for an early second increase in rates - which looks unlikely just now - then all bets are off.