Not surprisingly, interest rates too tended to track those in London. But there were two notable exceptions. The first was in 1932 with the formation of a Fianna Fáil government, in apparent response to which the Irish banks, seemingly fearful of radicalism, widened their lending spreads over the London bank rate (cf. Ó Gráda, 1994).
In standard economic models, inflation expectations are an important determinant of actual inflation because, in deciding how much to adjust wages for individual jobs and prices of goods  15  For example, predictions from a simple empirical model track recent movements in the employment cost index reasonably well, because the model estimates that the increasing upward pressure on compensation growth from rising labor utilization is being offset by a declining contribution from productivity growth.