The Government has come under renewed pressure from the Irish Congress of Trade Unions (ICTU) to take short-term measures to curb inflation.

Fine Gael has also called for "radical action" from the Minister for Finance, Mr McCreevy. With inflation now expected to peak at over 5 per cent this year, ICTU is concerned that the impact of the 5.5 per cent pay increase due under the Programme for Prosperity and Fairness will be wiped out. "We don't accept the view that you can sit back and wait for inflation to come down. We want to see some action on the domestic front," said Mr Des Geraghty, the vice-president of SIPTU, the State's largest trade union.

SIPTU wants the Government to cut duty on petrol, which would have an immediate downward influence on inflation with only a minimal influence on the overall Exchequer.

Mr Michael Noonan, the Fine Gael spokesman on finance, has rowed in behind the unions warning: "There is now a danger that the Government's industrial relations policy will be undermined."

Mr Peter Cassells, the general secretary of ICTU has also called for lower duties on petrol, oil and diesel. ICTU would also like to see reductions in VAT on goods and services which contribute substantially to inflation.

The Minister for Finance, Mr McCreevy, declined to comment on the figures yesterday. It was left to Mr Tom Kitt, the junior minister at the Department of Enterprise, Trade and Employment, to defend the Government's inaction. Mr Kitt said many of the factors contributing to inflation were of a once-off nature and beyond the control of the Government.

Mr Derek McDowell, the Labour spokesman on finance, claimed that inflation had "completely cancelled out" the social welfare increases announced in the Budget. "It is crucial that the Minister for Finance wakes up. Instead of complacency and flippancy, he should plan the economy in a manner that can resist shockwaves caused by inflation." There is very little the Government can do to bring down inflation and they should resist the temptation to try and tweak the figures by means of cuts in indirect taxation, according to Mr Jim Power, chief economist with Bank of Ireland.

"Reducing indirect taxation through cuts in excise duty only puts more money in people's pockets and stimulates demand," he said. "There is nothing the Government can do. They are helpless in the face of spiralling inflation. This was always going to be the case in a single currency but nobody expected it to happen so soon," said Mr Power.