GERMAN BANKS SEE LOW INTEREST RATES CONTINUING

  The Association of German Cooperative
  Banks said in a financial survey that domestic interest rates
  would continue to remain low for the time being.
      It said the Bundesbank could hold them down despite strong
  foreign influence and it saw no interest-straining factors in
  the economy that could affect the long-term capital market.
      The inflation rate of one pct also gave no occasion for
  higher nominal interest rates. But a probable rise in inflation
  late this year could give very slight grounds for a rise in
  nominal rates at year's end and next year, it said.
      The association said generally low interest rates,
  prospects of lower taxes, a stable dollar rate and expected
  strong domestic demand led it to believe that the investment
  climate would remain friendly and the economy would continue
  its slow but very sure growth.
      The Bundesbank had managed successfully to keep interest
  rates down on the short-term money market although its policies
  had exerted little effect on the long-term capital market,
  which was so important for investment financing and thus for
  the course of the economy, it said.
      In view of the limits to the possibilities monetary policy
  had in influencing the longer-term capital market, the
  association saw little sense in wanting to boost the economy
  through a short-term and expansionist monetary policy.
      On the other hand it also saw no reason for sticking
  dogmatically to the money supply target for the whole of 1987.
      The association said time would show to what extent
  speculative foreign money and short-term invested domestic
  money would distort money supply developments. The Bundesbank
  could hold down money market rates with the highly effective
  instrument of sale and repurchase transactions, it said.
  

