The annual inflation rate moved back up to 5% last month, having dipped to 4.9% in June, according to figures from the Central Statistics Office.
The increase was mainly due to higher mortgage repayments following June's interest rate rise from the European Central Bank. Increases in air fares and petrol prices also contributed to the rise.
An EU measure of inflation, which excludes mortgage repayments, showed a drop from 2.8% in June to 2.7%.
A breakdown of the CSO figures showed that annual inflation in the service sector of the economy was 8.7% in July, while the rate for goods was just 0.6%.
The monthly rise in prices was 0.3%, with the housing category showing a 2.6% increase and transport up 1.1%. But clothing and footwear prices fell 8.4% due to summer sales.
Bloxham economist Alan McQuaid said there should be good news for consumers from lower gas bills later in the year, but oil prices may go up again in winter while consumers also face another mortgage rate hike from the ECB in September. He also pointed to uncertainty over food prices, because of soaring world commodity prices.
'We continue to believe that the average headline inflation rate for 2007 will be no lower than 5%, leaving the Government with plenty of headaches in the run-up to the 2008 Budget,' the economist said.
Goodbody Stockbrokers said mortgage interest rates accounted for almost half of the 5% annual rise, and this would remain a factor with more rates rise to come.
The broker also noted a continuing upward trend in food inflation, at a 14-month high of 2.6%. 'Should concerns over Food and Mouth Disease become more serious, this would likely provide further upward pressure on food prices as was the case at the time of the previous FMD scare in 2001,' Goodbody said.
