IRISH inflation figures due tomorrow will be even more closely watched than usual given the Central Bank's concern about inflation and house prices. Three month interest rates moved up to 5.25 per cent yesterday, the highest level since January 29th, on," worries that the inflation data could be stronger than predicted, perhaps even forcing an interest rate increase from the Central Bank. Only six weeks ago three month rates were trading below 5 per cent. However, forecasts for the annual consumer price index, range from 2.3 per cent at the top to 1.3 per cent, a much bigger difference than usual.

If either of these figures is right the implications are very different for Irish savers and borrowers. A large inflation figure of 2.3 per cent, as forecast by Bank of Ireland Treasury chief economist Mr Jim Power, could force a response from the Central Bank. If followed by strong housing statistics later this month it could indicate an interest rate increase in the future and could even put Manstricht qualification in jeopardy.

A low figure of 1.3 per cent, as forecast by Davy chief economist Mr Jim O'Leary, would be taken as very good news. The prospects of interest rate rises would recede into the background, and long term rates could even fall. The consensus forecast is for inflation of 2 per cent or just below.