The silver lining: Irish rates lower for longer

Most Irish households would probably struggle to identify any direct link between their daily lives and a slump in hugely-overvalued American company stock prices, writes Eamon Quinn.

Americans have much more of their personal wealth and pension plans riding on the performance of stockmarket indices such as the Dow or S&P than the average Irish family will have on the daily gyrations of the Iseq.

What makes the Wall Street slide remarkable (the shock waves are still not large enough to make the grade as ‘a crash’ or even ‘a correction’) was it had long been anticipated.

Apple shares, the world’s most valuable company, had soared, and the excitement generated by US president Donald Trump’s corporate tax cuts added huge froth to US stockmarkets expecting massive dividend payouts.

In Ireland, we know market signals are important for their early-warning role.

Years before the 2007 banking crash, international investors were quietly selling their Irish bank stocks.

This time there could be a silver lining for Irish households and firms who 10 years after the crash are still among Europe’s most indebted: Continuing falls in global shares could mean the ECB will have to keep interest rates lower for longer.

Market wagers predict the ECB will start raising rates next year, but any rises may be delayed if markets continue to slide.

“It could definitely help the more dovish members on the ECB Governing Council to keep interest rates unchanged,” said Owen Callan, equity analyst at Investec Ireland.