Lending remained strong in November with underlying credit growth slipping only slightly, to 21 per cent from 21.4 per cent in October, Central Bank figures, released yesterday, have shown. Growth in residential mortgage lending edged up to 15.6 per cent in November from 15.4 per cent in October and averaged around 15 per cent in the first 11 months of 1997.

But non-mortgage lending showed signs of a slowdown in November, rising by 22.6 per cent compared with an annual increase of 24.9 per cent the previous month.

Analysts said the persistence of high credit growth came as no surprise.

"It reflects a buoyant economy, historically low nominal interest rates and the expectation that rates will be permanently lower than in the past," said Mr Austin Hughes, economist at Irish Intercontinental Bank.

Analysts said there was little the Central Bank could do to slow the demand for credit despite its repeated concerns that the housing and lending boom could cause the economy to overheat. Its normal response to raise interest rates

is no longer possible as interest rates are set to fall by up to two percentage points as they approach German levels ahead of European Economic and Monetary Union (EMU).

"The advent of EMU means instruments are not available to the Central Bank to restrain credit growth," Mr Hughes said.

Analysts said the main impact of the data would be to slow the pace at which interest rates are cut.

"We expect the cuts to be made gradually, with 50 basis points being knocked off in each of the four quarters," said Mr Alan McQuaid, economist at Bloxham Stockbrokers.

The figures also showed that Ireland's official external reserves rose by £344 million to £5.4 billion at the end of November.