Tommy Broughan (Dublin Bay North, Independent)
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262. To ask the Minister for Finance his Department's current assessment of future likely developments in interest rates during 2017 and 2018 and of the likely impacts on the economy; and if he will make a statement on the matter. [19907/17]

Michael Noonan (Limerick City, Fine Gael)
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The primary objective of the European Central Bank (ECB) is to maintain price stability within the euro area by implementing monetary policy which is consistent with an inflation rate of below, but close to, 2 per cent over the medium term. As part of this mandate, in accordance with Article 127(2) of the Treaty on the Functioning of the European Union, the ECB has the sole responsibility for the definition and implementation of monetary policy within the European Union.

In the face of weak inflation dynamics across the Eurozone in recent years, the ECB has maintained an accommodative interest rate position of close to, and in some cases below, the zero bound on its three key interest rates. In its most recent monetary policy decision of April 27th 2017, the ECB Governing Council (GC) maintained these key interest rates at the levels which have been in operation since March of 2016.

Following the April 2017 meeting, the ECB GC also reaffirmed its expectation that its key interest rates will remain at present or lower levels for an extended period of time, and well past the horizon of its Expanded Asset Purchase Programme (i.e. QE), which is scheduled to continue until the end of December 2017 at the earliest, or until a sustained adjustment in the path of inflation consistent with the stated aim of the ECB is observed.

In the recently published Stability Programme Update for 2017, the Department of Finance provided estimates of the impact of a 1 percentage point increase in the main ECB interest rate (i.e. main refinancing operations) on a range of economic indicators over the period from 2017 to 2021. Based on this analysis, such an increase would lead to Irish output being 1.3 per cent below the “no interest rate change" baseline forecast by 2018 and unemployment being 0.3 percentage points higher than baseline over the same time horizon.