The rate of inflation eased last month as the impact of the abolition earlier this year of controls on the price of groceries began to feed through.

Overall inflation dipped to 3.9 per cent, compared to 4 per cent in September and remains significantly higher than the average rate of 2.5 per cent recorded last year. However the price of goods fell by 0.3 per cent while the price of services rose by 4.9 per cent, according to the Central Statistics Office.

Ulster Bank chief economist Pat McArdle attributed trends in goods prices to the abolition of the Groceries Order last February which ended the ban on below-cost selling of packaged groceries. "Prices of Groceries Order items continue to edge down, albeit painfully slowly. They are down 1 per cent over the past six months whereas non-Groceries Order items are up 0.2 per cent in the same period," Mr McArdle said yesterday.

Dermot O'Leary, of Goodbody stockbrokers, also supported this view while adding that the strength of inflation in the services sector was worrying.

"Stark divergences still remain between the rates of increase being witnessed in goods and services. This divergence widened to a record level in October," Mr O'Leary said yesterday.

Prices also fell in annual terms for clothes and shoes by 1.1 per cent, and in the category of food and non-alcoholic Beverages, by 0.3 per cent.

Fergal O'Brien, senior economist with IBEC, said increases in government-controlled prices were a major contributor to persistent inflation.

"With annual price inflation for education running at 5.9 per cent; water services and refuse collection at 6.9 per cent and outpatient services at 6.6 per cent, it is clear that the public sector is not helping to ease inflationary pressures," Mr O'Brien said yesterday.

"When you strip out factors like rising mortgage interest rates, which affect every country, you discover that the government is the main driver of higher inflation in Ireland compared to the rest of the EU," Fine Gael finance spokesman Richard Bruton said yesterday.

Labour Party consumer affairs spokeswoman Kathleen Lynch said the government's record on inflation was one of its most significant failures.