The cost of living continued to increase in May, though at a slower rate than in previous months.

Figures released by the CSO this morning show that the the consumer price index rose by 0.1 per cent last month. This compares to a 0.4 per cent jump between March and April, and a 0.9 per cent in the previous two months.

The annual rate of inflation now stands at 2.7 per cent - meaning that prices were 2.7 per cent higher last month than they were in May 2010. However, this is lower than the annual inflation rate of 3.2 per cent recorded in April.

As with previous months, higher mortgage and energy costs were the main contributor to the rise in costs compared to a year ago. In terms of monthly trends, an increase in the cost of men's clothes, hotel rates and higher prices for spirits sold in off licences and supermarkets contributed to the increase in the consumer price index last month.

Ireland's rate of inflation has been creeping up since August 2010 after more than a year and a half of deflationary trends.

The ECB is due to announce a decision on interest rate policy later on today, with commentators expecting the bank to indicate plans to implement a rate change in July.

Responding to the fall in inflation, ISME, the Irish Small & Medium Enterprises Association, warned against complacency.

"With inflation still at relatively high levels, the Government needs to put the brake on rising costs, particularly those that directly affect hard pressed businesses" chief executive Mark Fielding said.

"While it is accepted that little can be done to address external influences, including interest rates and oil prices, the reality from a business viewpoint is that domestic cost increases, in particular, commercial rates, wage costs, rents and utilities, continue to eat away at the bottom line, distressing thousands of companies throughout the country."