Figures released yesterday indicate that some parts of the economy may be starting to slow down. The rate of growth of private sector credit - borrowing by Irish residents and business from Irish banks - fell in September, according to the Central Bank.

Mortgage lending has also slowed, confirming anecdotal evidence that the number of people taking out mortgages is starting to fall in response to higher interest rates, according to Mr Aziz McMahon, treasury economist with Ulster Bank Treasury.

"Rate hikes are biting more now than they did previously," he said. He added that given the economy's overall strength the figures could not be taken as conclusive evidence of a slow-down.

Private sector credit grew by 0.6 per cent to €108.9 billion (£85.7 billion) in September. When adjustments are made for exceptional items, the annual private sector credit growth was 23.7 per cent. This compares to a rate of 26.4 per cent in August which represented a five-month peak and a record 33.4 per cent rise for 1999.

The rate of growth in mortgage borrowing fell from 17.9 per cent to 16.9 per cent, but the mortgage figure should be treated with caution, according to the bank.

Signs that borrowing was once again on the decline after an upward blip in August will strengthen the hand of the Tanaiste, Ms Harney, and others in the Cabinet seeking significant cuts in the higher and lower tax rates in the Budget. She faces a united front of the Taoiseach, Mr Ahern, employers' group IBEC and the Irish Congress of Trade Unions who want modest reductions in the lower rate to avoid putting further upward pressure on inflation. IBEC, which represents big companies, last week said reductions should be limited to 1p off the lower rate. The cuts should be linked to agreement by the social partners to adhere to the Programme for Prosperity and Fairness, it said.

The private sector credit figure for September had to be adjusted to take into account the partial sale by an Irish institution of a subsidiary. This reduced the overall figure by €1 billion. Another Irish institution sold off €350 million of mortgages, mostly to non-resident banks which further reduced the overall lending by Irish banks. When these factors are excluded from the calculations, the annual rate of increase in private sector lending by Irish institutions in September was 25.8 per cent, which is still lower than in August.

The Republic's official reserves of foreign currency stood at €5.998 billion, an increase of €545 million. The increase was accounted for by a write-up of €426 million in the value of the reserves following a quarterly revaluation adjustment.