Consumer prices rose by 2.5 per cent in the year to December 2011, new data from the Central Statistics Office showed.
A 0.3 per cent fall over the month pushed the inflation rate lower, from 2.9 per cent recorded over the 12 months to the end of November.
The yearly price hikes were fuelled by an 8.9 per cent rise in the cost of education, while housing and utilities were 8.4 per cent higher. Health costs increased throughout the year too, rising by 2.6 per cent.
The cost of furnishings and household maintenance fell by 1.9 per cent, while prices at restaurants and hotels declined by 0.9 per cent.
The rate of inflation for services was 3.6 per cent for the year, and goods prices rose by 0.9 per cent.
On a monthly basis, prices for housing, water and fuels were down by 1.4 per cent, driven by lower mortgage interest repayments. Clothing and footwear was 1.1 per cent cheaper than in November, and the cost of transport declined slightly as the price of second-hand cars and petrol fell.
Meanwhile, the EU Harmonised Index of Consumer Prices (HICP) fell by 0.1 per cent compared with November, and were 1.4 per cent higher over the year.
Davy chief economist Conall Mac Coille said ECB rate cuts and reductions in the price of oil were now "bearing down" on the CPI inflation rate.
"Underlying inflationary pressures remain weak, with the bulk of the 2.5 per cent CPI inflation still accounted for by energy and mortgage interest," he said.
He said the pressure on households' spending power due to price rises would fall in 2012.
Bloxham predicted average headline price inflation of no more than 1.5 per cent in 2012, compared to 2.6 per cent in 2011.
"Inflationary pressure is coming off around the world. That's encouraging. Soaring oil and commodity prices threatened an inflationary wave in emerging economies in 2011 which might easily have drowned their fast growth. But the inflation easing has come in part because monetary policy had to tighten and Europe has weakened," said chief economist Alan McQuaid.
"As regards Ireland, domestic inflationary pressures are likely to remain subdued for some time to come. Continued weak consumer demand will put downward pressure on prices in the coming months, though the indirect tax changes announced in Budget 2012 will add to the CPI."
Meanwhile, Isme, the Irish Small & Medium Enterprises Association, called for the Government to address the increasing cost burden on business caused by State-imposed costs.
