Inflation rose to 3.9 per cent in May, its highest level in three years. The rise was attributed to higher energy costs and public service charges.

Inflation has now increased for five months in a row and looks set to increase further after the European Central Bank (ECB) put up interest rates by a quarter of a percentage point yesterday.

The impact of higher oil prices pushed inflation in the housing, water, electricity, gas and other fuels category to 14 per cent in May, while transport costs rose by 4.8 per cent, according to the Central Statistics Office.

Inflation in the education and health sectors, 4.7 and 4.5 per cent respectively, was significantly stronger in Ireland than in the euro zone, where respective rates were 2.6 and 1.1 per cent.

Combined inflation for goods was 2.6 per cent in May and remains significantly lower than either the headline rate of inflation or the combined rate of services inflation, which reached 5.1 per cent. Prices of utilities and local authority charges also rose annually by 5.1 per cent in May.

Annual inflation remains negative in some sectors of the economy, including clothing and footwear, furniture and household products, and communications costs, but prices have tended strongly upwards in all these categories in recent months, contributing to a 1.7 per cent general price increase between February and May.

Analysts said that more recent price rises could not be pinned on higher interest rates or Government action and some predicted that inflation would rise further.

"While energy and interest rates are the big drivers in an overall sense, the worrying aspect of recent CPI data is the increase in core items such as food and accommodation. The core CPI, eg excluding both interest rates and energy, was 1.5 per cent last January but is now 2.3 per cent," Ulster Bank chief economist Pat McArdle said yesterday. "The outlook for the remainder of the year will depend on the ECB. We have to allow for a further two one-quarter percentage point rises between now and the end of the year," he added.

"The inflation picture is deteriorating fast, with the headline rate set to be running at 4 per cent or higher in our view by the summer, and to average somewhere between 3.5 per cent and 4 per cent for the year as a whole, compared with 2.5 per cent in 2005," Alan McQuaid, chief economist with Bloxham Stockbrokers said.

Kathleen Lynch, Labour spokeswoman on consumer affairs, yesterday accused the Government of contributing to inflation. "Today's inflation figures prove once again that the Government has no strategy to tackle rip-offs," she said.