In its 2006 Focus Report, Ulster Bank warns of two additional 0.25% interest rate rises from the European Central bank, a 0.25% UK rate cut and US rates peaking at 5%.
Niall Dunne, Ulster Bank's Financial Markets Strategist, says that inflation is back to concern the market as we move into 2006, and may force interest rates higher in the year ahead.
He says the main reason behind the recent ECB rate hike was an acceleration in credit growth. 'As the overall money supply grows - be it paper, plastic or credit - inflationary pressures build and price stability is threatened,' he explains.
'The annual rate of money supply recently exceeded 8%, a rate of acceleration not seen since 2003, and that seems to have triggered bells in the ECB's Frankfurt tower,' he said.
He says that Ulster Bank forecast another rate increase in February. Then if economic conditions permit, the bank expects another move upwards in the summer.
In the UK, Ulster Bank predicts at least one more rate cut early next year, with risks of further easing in the months beyond. The bank also expects a weaker dollar in the year ahead.
