The headline inflation rate moved up to 4.2% in December from 3.8% in November, according to figures from the Central Statistics Office on Friday.
Prices rose 0.5% in the month. The December figures brings the average annual rate for 2001 to 4.9%, compared with 5.6% in 2000.
The main factors in the increase were an increase in excise duty on tobacco in the Budget, and a rise in transport costs because of higher fuel prices, taxi fares and excise duties.
Prices across a range of services - including medical fees, entertainment and video hire - also rose, but housing costs fell as interest rates dropped. The annual rate of service inflation is now running at 8.3%, the highest rate for almost 18 years.
The EU Harmonised Index of Consumer Prices was up 4.4% on an annual basis after a 0.9% rise in the month.
* The Minister for Consumer Affairs, Tom Kitt, said there was nothing to suggest that the 'disappointing' increase in the rate of inflation was related to the introduction of the euro.
'I believe that the vast majority of traders want to behave fairly and honestly in the changeover to the euro. Consumer vigilance is the best protection against any possible unjustified price rises,' he added.
