The Minister for Finance, Mr McCreevy, has signalled that price pressures across the euro zone will weaken in the short term. Mr McCreevy's comments followed fresh inflation figures from the European Union which recorded that euro-zone inflation hit an 11-month high of 2.4 per cent in February.

Speaking in Dublin, Mr McCreevy said there was evidence that inflationary pressures would ease. "There is some evidence that pressures are easing off and we would hope that over the course of the year the trend is going to be downwards," he said yesterday.

Euro-zone consumer prices rose faster than expected in February as higher fuel prices drove the rate of inflation higher.

February was the seventh month that euro-zone inflation had exceeded the European Central Bank's ceiling of 2 per cent.

Mr McCreevy dismissed suggestions that the increase in the rate of inflation in Ireland was due to a rise in indirect taxes in the last Budget. "If you look at the facts, the big drivers of inflation are services inflation," he said.

"We made a prediction at Budget time that the average inflation rate would be in the order of 4.5 per cent by the end of the year. That would mean that the figure at the end of the year would be a lot lower than it is now," the Minister said.

The annual inflation rate was higher than Eurostat's initial estimate of 2.3 per cent, which economists had expected to be confirmed, and also above January's 2.2 per cent.

Consumer prices rose by a larger-than-expected 0.4 per cent on a monthly basis. "Energy prices are having a big upwards impact on inflation and had a very significant impact this month," a Eurostat official said. - (Reuters)