IRISH interest rates may be on their way down following a cut in the key German money market interest rate. Mr Hans de Jong, chief economist at Goodbody Stockbrokers, said the tighter than expected Budget also leaves room for the Central Bank to cut rates.

Predicting that the German central bank will soon cuts its official interest rates again, he said: "The Bundesbank is getting scared." The Bundesbank allowed its main money market rate - the repo rate - to fall 0.1 of a percentage point to 3.55 per cent on Wednesday morning. Traders are now expecting a further small cut in the key German Lombard and discount rates within weeks.

The repo rate has now fallen by 0.2 of a percentage point in the last three weeks, following a similar pattern to that seen in the lead up to the previous key rate cut.

At that time the Bundesbank cut half a percentage point off rates, leaving the floor discount rate at 3 per cent and the ceiling Lombard rate at 5 per cent. The Irish Central Bank followed immediately with a 0.5 per cent cut which knocked on to a reduction in retail interest rates.