Inflation is running at its highest level in six years. The annual rate in the State, at 3.2 per cent, is now the highest among the 11 states entering monetary union.
Forecasters believe the inflation rate may have peaked and will fall during the next few months. But the latest figures mean the Central Bank is unlikely to cut interest rates over the next couple of weeks.
After falling unexpectedly in July, the latest figures from the Central Statistics Office show consumer prices are once again growing - up 0.3 per cent in August - to give an annual rate of 3.2 per cent.
Ireland would fail the inflation criteria set down for monetary union if the judgment was made on this year's figures, as opposed to the 1997 data which were used.
Ironically, as inflation rises, the global stock market turmoil will be easing the Central Bank's worries about the inflationary outlook. Indications are growing that the fallout from the Asian crisis is lowering inflation worldwide, with the German annual rate of inflation for August coming in at 0.8 per cent, the same level as France.
Sterling and the dollar are also falling on international markets, which should also keep a lid on inflationary pressures in Ireland by keeping down import prices.
As a result, according to Mr Jim Power, chief economist at Bank of Ireland, the latest rise in inflation is merely a blip and the rate should fall back in the months ahead.
Dr Dan McLaughlin, chief economist at ABN Amro, said a prime factor in the monthly rise was a strong rebound in clothing and footwear prices following the summer sales, and an increase in the prices of durable goods.
A rapid rise in rents also boosted the index, but a fall in mortgage rates over the coming months will help to moderate the rise in the consumer prices index.
The Fine Gael spokesman on finance, Mr Michael Noonan, said the Minister for Finance had to be prepared to take specific anti-inflationary measures in the Budget if there was evidence of inflation moving out of control.