The annual rate of inflation fell to 4.3% in April from 4.9% in March, according to the Central Statistics Office. April's annual rate is the lowest since July last year. Prices rose by 0.3% in the month.
The EU Harmonised Index of Consumer Prices rose by 0.5% in the month, giving an annual rate of 4.6%.
Average mortgage repayments are now down 4% compared with last year, according to the CSO, due to cuts in interest rates. This explains much of the fall in the annual rate of inflation last month. The price of clothing and footwear has also fallen, thanks to an increase in the value of the euro as many of these good are imported.
But despite this positive news, the inflation rate is still the highest in Europe running at over twice the euro zone average with Government taxes accounting for a third of price rises. In addition, Eircom's telephone line rental, ESB bills, bus and train fares all increased last month.
Other services like education and health continue to rise at over twice the average rate, while the cost of alcohol and tobacco is rising at 10% a year.
The strength of the euro and lower oil prices should continue to bring inflation down but domestic service sector inflation still remains high.
Employers' organisation IBEC warned against assuming that the inflation threat was about to disappear. Director of economic affairs Brian Geoghegan pointed out that Ireland's inflation rate was still more than double the EU average and that if changes in interest rates were excluded the April figure remained a worrying 4.7%.
Small business group ISME welcomed the reduction, but warned against complacency and criticised the Government for relying on external factors to bring the rate down.
IIB Bank's Austin Hughes said a trend towards lower Irish inflation is now becoming established because of weaker global economic conditions and the rising euro. But he warned that domestic cost pressures mean the scale of last month's decline is unlikely to be repeated unless interest rates and/or oil prices collapse.
He said that he sees inflation average around 4.3% his year, but if the global economy remains weak and the euro stays strong, it thinks it is readily possible to envisage inflation dropping below 3% in 2004.
