Prices rose by 0.6 per cent in May as food, housing and transport prices all continued to rise, but the annual inflation rate fell to 5.4 per cent from 5.6 per cent in April.
Over the month the most significant price changes were in housing, which was up 1.6 per cent on the back of higher rents and mortgage increases, according to the latest data from the Central Statistics Office. The data were taken on May 8th, before lenders began implementing the most recent cuts.
On an EU-harmonised basis, inflation also rose 0.6 per cent in May and by 4.1 per cent over the year.
Food was up 0.6 per cent with increases in the prices of fresh vegetables, poultry, lamb, pork, restaurant meals, sweets, and bread. The price of beef, milk, potatoes and soft drinks all fell.
Transport costs rose 1.4 per cent due to higher fuel prices and increased insurance premiums, while fuel and light were up 0.5 per cent on the back of increased prices for home heating oil and bottled gas.
Over the year as a whole, the most notable changes were in housing, which was up a massive 22 per cent, in food which rose 7 per cent, in fuel and light which climbed 5.1 per cent and in alcoholic drink which was 4.7 per cent more expensive.
According to Mr Austin Hughes, chief economist at IIB Bank, we have probably passed the peak in inflation for the year. However, he added that downward progress was likely to be unsteady. "Inflation will average around 4.8 per cent for the year as a whole," he said.
Mr Oliver Mangan, of AIB, said inflation would average 4.5 per cent, finishing the year at 3 per cent, particularly if the ECB cuts interest rates later in the year.
Mr Hughes said there is a risk that food and energy prices will continue to rise over the coming months. However, he added these should fall back again in the autumn as the foot-and-mouth restrictions ease.
The worry is that this could be offset by increases in electricity costs and TV licences as well as the "pronounced risk to consumer prices at the beginning of 2002 from the introduction of euro notes and coins", according to Mr Hughes.
The Government Chief Whip, Mr Seamus Brennan, warmly welcomed the figures. He said he "was hopeful inflation should continue to moderate in the coming months. Today's figure is further evidence that the Government's economic policies are working". ATGWU leader Mr Mick O'Reilly described the figures as "disastrous" for Irish workers and those on social welfare.
"The drop of 0.2 per cent is a joke. An inflation rate of 5.4 per cent is totally unacceptable to the ATGWU."
Mr Pat Delaney, director of the Small Firms' Association, said the slight fall was to be welcomed but warned that increases in rents would have to be tackled.
