Inflation out of line

Irish inflation has moved further out of line with European inflation with confirmation that French and German price rises are running at an annual rate of below 1.5 per cent. Earlier this week Irish inflation rose to its highest level in three years at 2.7 per cent in the year to May.

German prices actually fell in the month of May and stood 1.3 per cent higher than a year earlier, from 1.4 per cent in April, as the price of oil products such as heating oil and fuel continued to fall, according to official data.

At the same time it was confirmed that French consumer prices rose 1 per cent in May and 0.1 percent from the April level, pulled up by a steep rise in fresh food prices.

The generally relaxed assessment of price pressures was reaffirmed earlier this week when European Central Bank President Mr Wim Duisenberg said inflation in Europe remained subdued.

Only Greece and Portugal are likely to have higher inflation than Ireland when May figures come in for all EU countries. The news is likely to push back the timing of interest rate rises across Europe and could mean that Irish interest rates will have further to fall than many had anticipated.

In Germany, oil product prices continued to fall in May, with heating oil down 2.4 per cent month-on-month and down 10 per cent year-on-year.