This day next week the European Central Bank's Governing Council will hold its April meeting and consider where it stands on interest rates and on the multi billion euro stimulus programme aimed at reviving the euro zone economy. Ahead of that two of its members, Benoit Couere and Peter Praet, have been talking the euro zone economy up. 

Austin Hughes, chief economist with KBC Bank Ireland, said there is now a sense in the European Central Bank that they have to alert people to the fact that negative interest rates and the extraordinary asset purchases are not a permanent situation. The ECB wants to begin that conversation, Mr Hughes said, but added that the manner in which it does so is very important for the European economy which is still fragile and where inflation is still relatively low. The bank "does not want to spook the horses by starting a conversation about a conversation about raising interest rates", the economist added. 


To this end Benoit Couere and Peter Praet - two of the more senior ECB officials - said yesterday that the time is not yet right to start increasing rates. Mr Hughes said that if the ECB moves relatively quickly - sometime next year - it will have some control. This would be similar to the US Federal Reserve's direction, which is is raising US interest rates in a gradual way. The feeling is that markets that have become used to low interest rates could cope with a relatively slow and a relatively orderly increase in rates, he explained. 

Asset prices have surged in recent months as people are having to take risks to generate any return. Mr Hughes pointed out that European house price data for the fourth quarter of last year shows - surprisingly - that Ireland saw only the eighth fastest house price rises. Asset prices are rising and financial institutions are coming under pressure and for that reason there is a case for normalising the rate environment, the economist said. But because Europe's economy remains fragile, any rate rises are going to be slow and cautious, he added. "We can expect a lot of noise over the next 12 months but no great movement on rates, and thereafter the ECB will hope to raise rates at a fairly measured pace," he added.

There is no question that Ireland remains vulnerable to any rate rises, Mr Hughes said. He said you could see a scenario where rates start to rise, Brexit becomes more disorderly and Donald Trump becomes "more annoying" in areas of tax policy. He said the critical element is the broader environment, and at the moment we should be OK at the pace of increase that is likely in the medium and longer term.

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MORNING BRIEFS - Ireland is on course to produce an extra billion litres of milk this year compared to the output of the dairy sector in 2015. Figures compiled by the Farmers' Journal show the main processors rapidly expanding production. Carbery and Aurivo, for example, have both reported double digit increases in percentage terms over last year's levels. The dairy sector is on course to deliver an extra billion litres of milk compared to 2015 when EU quotas were abolished. The addition of new heifers to the national herd is the biggest factor supply as they are now approaching their peak output years. Global dairy markets are volatile and a supply overhang is keeping downward pressure on prices. The supply surge comes as the sector faces significant Brexit related challenges. 40% of Ireland's milk is used to make cheese and more than half of that is exported to the UK.

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West Cork-based Carbery Group, a food business owned by four co-ops in the region, has reported annual earnings - before accounting for interest charges, tax and depreciation of its assets - of €37m. Earnings were up almost 5% on turnover of €340m which was down from €349.5m in 2015. Chief executive Dan MacSweeney said dairy markets were difficult in the early part of this year. In the medium term, he said, Brexit presents a significant challenge. But he added that Carbery is "evaluating all possible scenarios" with a view to limiting its impact.

*** Dubai-based airline Emirates has cut back on flights into the US. Emirates said it is cutting flights to five US cities - LA, Boston, Orlando, Seattle and Fort Lauderdale from next month. "The recent actions taken by the US government relating to the issue of entry visas, heightened security vetting and restrictions on electronic devices in aircraft cabins have had a direct impact on consumer interest and demand for air travel into the US," Emirates said in a statement.

*** The soaring cost of Premier League football television rights has hurt profit margins at broadcaster Sky. Results for the nine months to the end of March published this morning show Sky reported subscriber and revenue growth across the UK and Ireland, Germany and Austria and Italy. But its operating profit fell by £129m to just over £1 billion. Costs related to acquiring Premier League rights were almost £0.5 billion higher year-on-year.