Inflation rate falls to 2.2%

The annual inflation rate fell further last month, down 0.1 per cent from January to 2.2 per cent. It was the third consecutive fall in the annual rate.

However, prices rose by 0.8 per cent in the month, according to the Central Statistics Office (CSO). Most of the increase was accounted for by higher spending on clothing, footwear, furnishing and household equipment, following the end of the Christmas sales.

Clothing and footwear rose 11 per cent in the month. Higher air fares and taxi fares as well as increases in petrol prices pushed transport costs up 0.6 per cent.

Consumers also had to absorb higher doctors' and dentists' fees last month. The figures showed that services inflation for the year was running at 4.1 per cent, while the annual rate of inflation for goods was just 0.2 per cent.

Fine Gael accused the Government of increasing tax "by stealth". It said the figures showed that local authority charges have risen by more than 100% since 2002.

Fine Gael spokesman on environment and local government Fergus O'Dowd accused the Government of over-extending its expenditure in the lead-in to the last general election.

"Since then, it has increased charges and starved local government of funding in order to cover up the fact that it spent what it could not afford in the run-up to the poll," he said.

IIB Bank said it expected inflation to remain subdued in coming months and is forecasting average inflation to be 2.3 per cent for the year.

"That said, inflation prospects have become a little cloudier of late," said IIB chief economist Austin Hughes. "In the past month, oil prices have risen by nearly $10 a barrel." However, he said against that, the euro is around 5 per cent higher against the dollar than it was a month ago. On balance, he added, IIB expects inflation to move onto a "modestly rising" trend.

Alan McQuaid, chief economist with Bloxhams, said there were signs that services inflation was picking up again.