Inflation rate rises just 0.1%

THE rate of inflation remains very moderate despite the high level of economic growth according to the latest official figures. They show that prices rose by just 0.1 per cent in March, lower than expected and indicating that Ireland remains well placed to meet the Maastricht inflation rules.

The only substantial increase in prices last month was in the clothing and footwear sector, where there was a 1 per cent rise. However, prices in this area are still 4.6 per cent lower than in early 1996, indicating the impact of competition on the retail market.

Because the Central Statistics Office has only begun to publish monthly figures this year, there is no comparable figure for March 1996. However, the March figure is 1.6 per cent above the February 1996 figure, the nearest comparable figure, indicating that, despite strong economic growth, inflationary pressures have remained very subdued.

In a comment on the figures, Riada stockbrokers said that the March increase was again below expectations, "continuing the trend of surprisingly good inflation numbers evident in 1997". The brokers expect inflation to average 1.7 per cent for the year, which means that Ireland should comfortably meet the Maastricht criteria in this area.

Meanwhile Irish Intercontinental Bank said that "the overwhelming evidence from these numbers is that inflation pressures remain extraordinarily muted".

Economists said that it was too early to say whether the weakness of the pound against sterling was feeding through to higher prices, although there was some evidence that this might be happening on a limited scale. Apart from the increase in clothing and footwear prices last month, durable household goods prices rose by 0.3 per cent and other goods by 0.2 per cent. The main downward influence on prices last month was the fuel and light sectors, where costs fell by 1.1 per cent.

The figures are likely to reassure the Central Bank that an increase in interest rates - which would be very difficult to engineer in any case - is not necessary. But economists do not expect an early cut in rates either.