The Taoiseach, Mr Ahern, has promised to review budgetary increases in social welfare payments and to take action to prevent profiteering in food, drink, petrol and housing prices as the annual level of inflation surged to 5.2 per cent.
With inflation running at almost three times the EU average rate and still rising, the figures have exceeded market expectations by up to 0.5 per cent and placed enormous pressure on the Programme for Prosperity and Fairness.
Further increases in the consumer price index now seem inevitable. Rising oil prices and mortgage increases will feed into the figures in June and July bringing the inflation rate close to 6 per cent, according to Mr Jim O'Leary, chief economist at Davy Stockbrokers.
Others believe the peak will be higher. Mr Jim Power, chief economist at Bank of Ireland, said price rises would peak at 6.5 per cent by September.
The Government spoke of its "concern" at the higher than anticipated figure and said it was committed to implementing a vigorous competition policy for food and drink to prevent excessive profit-taking. Mr Ahern estimated that the baseline profit margin in the pub trade was 50 per cent.
In spite of its concern, however, the only early remedial action expected from the Government is in the housing sector. Following extensive deliberations at Cabinet yesterday, it will announce a series of measures tomorrow designed to control inflationary pressures in the industry. Action will be based on a third report by Mr Peter Bacon.
In a move to reassure workers and social welfare recipients that increases in living standards will not be wiped out by price rises, the Government will shortly meet representatives of ICTU and the social partners to discuss anti-inflationary measures.
The ICTU is seeking an urgent meeting with the Taoiseach. Its executive meets next Wednesday and its general purposes committee will be anxious to report on any discussions by then. Already some union leaders are calling for a special delegate conference on the Programme for Prosperity and Fairness.
The Fine Gael spokesman on finance, Mr Michael Noonan, blamed the inflationary increase on the last budget and said rising prices were threatening our prosperity. We had reached a point where confidence in the continuing prosperity of the economy was being threatened, he said.
The Labour Party spokesman on finance regarded the inflationary trend as extremely worrying and said it would jeopardise the social partnership agreement if it was not countered.
The latest figures will put pressure on the Minister for Finance, Mr McCreevy, to increase his forecast again for the average rate of inflation this year. He recently revised it up to 4 per cent and an average 2000 inflation rate of 5 per cent or more is now likely at the next revision.
On an EU-harmonised basis - which adjusts the figures to allow a direct comparison with the rest of the Union - inflation is running at 5.1 per cent from 5 per cent in April and is still at the very top of the €11 inflation league.
The European Central Bank refused to make any comment about the inflation outlook in an individual member-state yesterday, but its chief economist, Mr Otmar Issing , did acknowledge yesterday that the Irish rate stood out from the rest, but said that higher tobacco excise prices were largely to blame.
However, the latest consumer price index figures show prices rising across the board in May, with most pressure coming last month from increases in the cost of housing from higher mortgage repayments and increasing rents.
Prices increased by 0.7 per cent in May, with increases in tobacco and alcohol prices also contributing. The price of services continues to rise steadily.