The Minister for Finance Charlie McCreevy has welcomed the latest inflation figures showing a fall in the annual inflation rate from 4.7% in May to 4.4% in June.
Speaking after an Ecofin meeting in Brussels, however, Mr McCreevy said the overall trend was still very high and that the figures masked domestic inflation in the services sector.
The Minister said he hoped measures in the competition area would bring prices down but he accepted that the 4.25% Budget inflation target for the year would be revised upwards to 4.5%.
The annual inflation rate was 4.4% in June, according to the Central Statistics Office, the lowest figure so far this year.
Consumer prices rose by 0.2% in the month. The EU harmonised index of consumer prices rose by 0.2% in the month and 4.5% on an annual basis. The annual HICP rate was 5% in May.
The CSO says the main factors in the improvement were an easing in the rate of growth in food and non-alcoholic drink prices, and a continuing decline in oil prices, which led to a decline in the rate for fuel prices.
Bloxham economist Alan McQuaid is still forecasting an average annual rate of 4.7% for this year, and says the figures continue to show Irish inflation running at a much higher rate than desirable. He adds that it is hard to see the rate falling below 4% in the near future.
McQuaid says the stronger euro should benefit Ireland, but this will take time to feed through.
* Separate CSO figures showed that the seasonally adjusted volume of industrial production for the three months to the end of May was 4.9% up on that for the previous three month period. The year-on-year increase for May 2002 was 16.5%.
