Financial institutions in the Republic will be on alert today, with some economists predicting the Central Bank will cut interest rates again. The European Central Bank (ECB) meets on Tuesday, and observers say the Irish authorities may wish to reduce rates before the gathering.

But with the latest figures showing that Ireland has the highest inflation rate of the euro zone, the Central Bank may also wait for a new batch of inflation figures, due on November 12th, before moving.

Irish interest rates are currently the highest of all the currencies that will join the euro in January; the key repo rate is expected to fall from its current level of 4.94 per cent to the current German rate of 3.3 per cent.

The latest inflation data showed that, on an EU harmonised basis, Irish inflation was 2.8 per cent last month, compared to an average of 1 per cent for the 11 members of the single currency.

Earlier this week, Italy cut its rates by one percentage point to 4 per cent; the timing surprised many, with some observers saying the move put additional pressure on the Irish monetary authorities.

" I wouldn't be surprised if they cut on Friday; it's a 60-40 chance and it would be 100 basis points off the repo," said Dr Dan McLaughlin, chief economist at ABN Amro Stockbrokers.

Mr Jim Power, chief economist at Bank of Ireland Group Treasury said the ECB meeting might sway the Irish Central Bank into moving today, but estimated the chance at 50-50. Mr Pat O'Sullivan, an economist at AIB, said he would not be surprised if the Bank moved today on rates, but he favoured a cut further down the line.