The Minister for Finance, Mr McCreevy, told the plenary session of the Programme for Prosperity and Fairness yesterday that it now looked as if average inflation for this year would be between 4.75 per cent and 5.25 per cent.
"Assuming that interest and exchange rates and oil prices do not change, I expect that inflation will increase further in the short term, before falling back somewhat in the figures published for December."
His forecast anticipates the Economic Review and Outlook due to be published by the Department of Finance next month.
Defending the anti-inflationary package introduced last month, Mr McCreevy said the Government "recognises the need for competition and regulatory reform and is committed to a structural reform programme to encourage competition across a whole range of markets".
He was optimistic that the measures last month to curb housing prices and maximise output would see an increase in the supply "of social and affordable housing".
He assured the social partners that "getting to grips with inflation is the key issue for the Government and one to which we will give a great deal of attention in the period ahead, and particularly between now and Budget day".
He said the Public Service Benchmarking Group had been established well ahead of schedule to look at pay. "Considerable progress" had already been made in setting up working groups on employee share ownership, gain-sharing and profit-sharing schemes.