Trade unions and employers' organisations maintain there is no cause for alarm over the latest rise in the rate of inflation, although the rate is now the highest among members of EU monetary union.
However, they have said the figures illustrate the need for a cautious budget from the Minister for Finance, Mr McCreevy in January.
The Central Statistics Office figures show inflation running at an annual rate of 2.9 per cent in June, up from 2.7 per cent in May. Using the slightly different, standardised EU method of measuring consumer price inflation, the May figure is 2.4 per cent, the highest in the 11 euro states.
The Irish Congress of Trade Unions (ICTU) said the latest figures did not mean Partnership 2000 would have to be amended to ensure pay increases were not wiped out by the increase in inflation. Mr Peter Cassells, general secretary, said tax cuts for the low-paid in the budget would not have any inflationary impact, but tax cuts for the "top 20 per cent will put at risk the achievements of recent years".
Mr Manus O'Riordan, an economist with SIPTU, said one way to prevent a further escalation in inflation would be for Mr McCreevy to reverse some of the changes made in last December's budget, including the reduction in capital gains tax. He added that the rise in food prices was "worrying", but the rate of inflation at the end of the year was more crucial than the current rate.
"If the rate is over 3 per cent by the end of the year, that is a potentially serious situation," he said.
Mr Brian Geoghegan, senior economist at IBEC, said he expected inflation to "level off" towards the end of the year, but only if Government spending was restrained.
"We see no impact on Partnership 2000 and, once the tax cuts are aimed at only the low paid, there should not be a problem," he said.
ISME spokesman, Mr Peter Faulkener, said the rise in inflation was "a currency correction" and the organisation expected the rate to fall back in the final quarter of the year.
He added that if inflation did not fall later in the year, Mr McCreevy might have to consider increasing taxation.
A spokesman for Dunnes Stores said the rise in food prices was caused by retailers holding back earlier price rises, caused by pressure on import prices when sterling was strong. He added that prices could be higher, but competition in the market kept them down. A spokeswoman for Tesco said that, because retailers buy sterling forward, the strength of the currency against the pound was only now being felt and feeding through to prices on the shelves.
