Business groups and unions have warned rising inflation and today's rise in European Central Bank (ECB) interest rates will increase pressure on businesses and households.
Consumer prices rose 3 per cent in the year to March, new data from the Central Statistics Office showed today.
On a monthly basis, prices were 0.9 per cent higher, driven by increases the cost of clothing and heating oil and mortgage interest rises. Inflation accelerated the fastest in more than two years last month.
Elsewhere, ECB policy makers meeting in Frankfurt today raised interest rates by a quarter percentage point to 1.25 per cent from a record low of 1 per cent.
National Irish Bank chief economist Dr Ronnie O'Toole said the inflation increase, the highest since 2008, would put pressure on households suffering from higher taxes and declining pay rates. However, he added prices were around 4 per cent lower than at their peak in mid-2008.
Dr O'Toole said inflation was projected to remain elevated until early next year and that the ECB was expected to use this window to increase rates at a moderate pace to 2 per cent.
The Irish Small and Medium Enterprises Association (Isme) said the "shocking" inflation increases would make a bad situation for business even worse.
"The latest sharp rise in inflation is deeply worrying . . . with dramatically increasing inflation continuing to add to the business cost base, in turn undermining competitiveness and leading to further job losses," said chief executive Mark Fielding.
Amid uncertainty of future oil prices, he said imminent increases in interest rates would push inflation to "unbearable levels" over the next few months.
Mr Fielding called on the Government to cut State influenced costs to businesses. "There is no doubt that significant cost increases, including local charges, particularly commercial rates, rents, energy and transport, continue to take their toll and undermine already struggling businesses."
Reacting to the ECB interest rate rise, Chambers Ireland chief executive Ian Talbot said: "The continuing increase in Ireland's inflation rate . . . is largely driven by interest rate increases and the growing cost of fuel and energy.
"While these variables are beyond our control, the Government can drive the Croke Park Agreement forward and implement other cost-saving measures immediately," he said, adding unions needed to "step up and play their part in pro-active engagements".
The 3 per cent consumer price rise in March from a year earlier comes after climbing 2.2 per cent in the previous month and is the biggest gain since October 2008.
Driving the yearly increase in the consumer price index was a 12.5 per cent rise in housing, water, electricity, gas and other fuel. When energy products were taken out of the index, inflation fell to 0.7 per cent in the month, and 1.9 per cent on an annual basis.
The Irish Congress of Trade Unions said it was concerned an "inexorable rise" in inflation was putting unsustainable pressure on working people and households.
Economic adviser Paul Sweeney said: “Despite massive spending cuts, severe austerity and deflationary policies we have seen a strong upward rise in the Consumer Price Index.
“With ongoing rises in oil and food prices, inflation is now taking strong hold in Ireland. In that context today’s interest rate rise by the European Central Bank is very unwelcome and is going to result in extra hardship for people all over the country," he said.
"Working people are being squeezed on too many fronts. There is a limit to the burden of austerity that any society, or household, can tolerate,” Mr Sweeney said.
