The annual rate of inflation fell below 2% in December to 1.9%, the lowest rate since October 1999, according to the Central Statistics Office.
Prices rose by 0.4% in the month, but this was lower than the 0.7% recorded in the same month in 2002.
The main increases in December came in the alcoholic beverages and tobacco category, which rose 2.1% because of higher excise duties on cigarettes. Transport costs were up 1.4%, also because of higher excise duties on petrol and diesel.
Communications prices fell 0.6%, however, because of lower mobile phone charges.
The annual rate of service inflation is running at 2.8%. The rate of inflation in health and education appears to be slowing with annual rises of 7% and 6.5% respectively.
The EU's harmonised index of consumer prices also rose by 0.4%, giving an annual rate of 2.9%. This measure is higher as it excludes mortgage interest payments, which fell sharply over the year. The average inflation rate for the whole of last year was 3.5%, down from 4.6% last year.
