The annual rate of credit growth accelerated again in July having fallen for four months, according to figures from the Central Bank.
The statistics also showed that residential mortgage borrowing is accelerating at an underlying rate of 22 per cent.
The news will bring little comfort to the Central Bank in deciding when to cut interest rates and is likely to delay the cuts to the end of the year.
According to Ms Jenny Pollack, economist at AIB, all the signs are pushing a rate cut to the end of the fourth quarter. "A diminishing chance of a German rate rise and turbulence in the equity markets are combining to push a rate cut back as far as possible," she noted.
Nevertheless, yesterday ACC Bank cut its variable rate for new borrowers in anticipation of rate cuts by the Central Bank. Its new rate is capped at 6.75 per cent until September 1999.
According to the Central Bank figures, the adjusted annual rate of growth in private sector credit increased to 23.1 per cent in July from 22.7 per cent in June. Residential mortgage lending was up 20.5 per cent compared with 19.5 per cent in June. If a £200 million securitisation in the mortgage market had not taken place in May this figure would have been in excess of 22 per cent, according to Mr Alan McQuaid, economist at Bloxham Stockbrokers.
The Central Bank had been hoping that credit growth would fall back significantly, if not to single digit figures, at least towards 15 per cent. It is concerned that the continued acceleration in borrowing could feed through to higher inflation as consumers have more money to spend.
It is also concerned that talk of lower interest rates may be adding steam to the mortgage market.
