The European Central Bank (ECB) is likely to cut interest rates by 0.5pc to 2.25pc in April, which would be good news for Irish inflation, according to John Beggs, chief economist with AIB Global Treasury. In his latest Market View article, Beggs said, "It is our view that the ECB will cut the refinancing rate by 0.5pc to 2.25pc in April. This should then represent the floor of eurozone official interest rates." "Another official interest rate cut should be good news for Irish inflation. It could potentially reduce the monthly rate of inflation in May by up to 0.5 percentage points," he added.
However, Beggs noted that while this should reduce the annual rate of headline inflation, the underlying rate would be unaffected. To cut the underlying rate, a greater dampening of domestic factors is necessary, he said. "Calculations made by the CSO show that of the annual rise in the CPI of 4.8pc in January, about 1.5 percentage points were due to the effects of indirect taxes," he said. //www.fxcentre.com