INFLATION remained subdued in April with consumer prices rising only 0.1 per cent on the month.

Prices were up 1.4 per cent in the 11 months, marginally below expectations. However, direct comparisons are difficult as there are no figures available for April last year.

On an EU harmonised basis, inflation is up 0.1 per cent since March and 1.3 per cent since the 11 months from May 1996.

The low figures make qualification for the single currency very likely as the average for the year would remain low even if inflation picks up later in the year.

The low rate also flies in the face of repeated warnings from the Central Bank and many economists that inflation is bound to pick up.

Nevertheless, Mr Jim O'Leary, chief economist at Davy Stockbrokers, warned that next month's figures would be vital.

The May figure would be able to be compared with the May figure in 1996. If the models are correct, inflation resulting from the pound's fall against sterling should also show signs of picking up by then.

According to the theory, inflation is a lagging indicator and it takes between six and nine months for a fall in the exchange rate to show up in the figures.

However, so far there are no signs of any pickup. Inflation remained low across the board with no commodity group accounting for more than 0.1 per cent of a change in the index.

Dr Dan McLaughlin, chief economist at Riada Stockbrokers, said one factor keeping inflation under control was subdued food prices and low inflation across Europe.

In addition, clothing and footwear prices have fallen by 4.8 per cent in the 11 months since last May. But Mr O'Leary said that he now believed that competition in the retail sector was not as significant a factor as he first thought in holding back price rises.

"If it was retail competition why did it just show up in the three months from November to February," he asked. "It is not as if the influx of retailers from the UK only occurred at the end of last year.

Mr O'Leary will be revising his inflation figures upwards on the hack of an analysis of exchange rate movements. "While retail competition may have been a factor I think it has been overplayed," he added.

He also warned there was a possibility that the inflation figures which would be used for qualification for the single currency could be for the 12 months up to the period. That would mean an average of the figures from May this year to April next year, which could produce a higher figure.

Dr McLaughlin is also still expecting a pickup in inflation. However, he admitted that it is very surprising that components such as services have not shown any signs of a pickup. Bigger mortgage repayments could also have been expected to have fed through, he added.

However, the 12 per cent depreciation against sterling since last September is bound to feed though, according to Dr McLaughlin.

"The danger here is that it does not really matter because we will have qualified," he said. "But monetary union may not happen, if it does we may not be in it and even if we are there are serious implications for employment if we go in with an accelerating inflation rate."