Inflation continued to drift down in June, as falling energy prices and the early arrival of summer sales helped to mask persistent price pressures in other parts of the economy.
Figures released by the Central Statistics Office (CSO) show the inflation rate fell from 3.7 per cent in May to 3.5 per cent in June. Inflation has been in decline for four consecutive months, with commentators predicting further falls over the rest of the year as a disinflationary trend takes hold.
Last month's inflation rate was the lowest recorded since the end of 1999.
Opposition parties have been quick to warn against complacency on price growth, however, repeating calls for greater competition in sheltered markets.
The latest data show that, while the annual rate of inflation for goods has fallen to 1.3 per cent, price growth in the services sector remains stubbornly high at 5.6 per cent.
Education prices are almost 10 per cent higher than they were a year ago, while health costs have increased by almost 8 per cent. Prices paid in restaurants, hotels and pubs have risen by 6.5 per cent, pushed in part by higher excise duties.
The Irish Hotels Federation responded to the numbers by calling on the Government to accelerate its commitment to driving down the costs of doing business.
Fine Gael's finance spokesman, Mr Richard Bruton, said the latest data highlighted "the dramatic scale of the Government's contribution to inflation".
He claimed it was "the height of cynicism" for the Government to have committed to an anti-inflation initiative in the latest partnership agreement.
Small-business lobby the Irish Small and Medium Enterprises Association urged the Government to stop interfering in the market unless it was prepared to reduce the cost of its own services.
The most significant annual fall in inflation last month came in clothing and footwear, where prices declined by 5.9 per cent.
The cost of home heating oil dropped by 4.5 per cent.
Economists said further reductions in the overall rate can be expected over coming months as the effect of June's cut in interest rates works its way into the numbers.
AIB economist Mr Oliver Mangan said that, if current disinflationary trends were maintained, annual price growth could dip below 2 per cent at the start of next year.
This would bring Irish inflation within the European Central Bank's (ECB) targeted rate for the first time, but, if accompanied by drops in other EU states, could give rise to deflation concerns.
The ECB yesterday left euro-zone interest rates unchanged at 2 per cent, predicting that the economy would begin to pick up as 2003 draws to a close.
ECB president Mr Wim Duisenberg said current rates were "appropriate" and were likely to remain unchanged for "a considerable time to come".
Economists at Davy Stockbrokers believe a rate cut can be expected before the end of the year, however.
Davy says that when this is combined with a moderation in domestic wage growth and cheaper imports, Irish inflation will move towards 2.5 per cent.
Green Party finance spokesman Mr Dan Boyle said the June decline should be considered against a backdrop of declining economic growth and increasing employment. He also accused the Tánaiste, Ms Harney, of adopting a "let them eat cake" attitude to price mark-ups.
Mr Brendan Howlin, Labour's spokesman on enterprise, trade and employment, was also critical of the Tánaiste's recent advice to shop around, saying it proved how distant she was from "the reality facing hard-pressed consumers on a daily basis".
Ms Ailish Forde of independent grocers' group, RGDATA, said 1.6 per cent inflation recorded in the grocery sector last month proved that grocers were delivering on competition. She described suggestions to the contrary as "persistent slurs".
