Official figures show that the annual rate of inflation eased sharply in November to 2.5% from 4% in October. This is the largest reduction since monthly records began.
According to the Central Statistics Office, the overall cost of living here fell by almost 1% during November alone. Lower mortgage repayments as well as petrol and diesel price cuts were the main reasons for the reduction.
The 2.5% annual rate is the lowest inflation has been for three years. All the signs suggest that further falls are likely in the months ahead.
The key factors behind the reduction are global, including a sharp interest rate reductions by the European Central Bank in October, as well as rapid cuts in international oil prices due to mounting evidence that the global economy has entered recession.
Today's figures show average mortgage repayments fell by 8.4% in November as banks began to pass the first of three interest rate reduction on to borrowers. Rents also fell by 6.1% during the month.
There was also a sharp reduction in the cost of home heating oil, which was down by more than 10% in November. In addition petrol prices were down 7.3% and diesel by almost 10%. These drops cancelled out the effect of higher cigarette prices due to excise duty increases announced in the Budget.
With further interest rate and oil price cuts still to be passed on to consumers, all the signs suggest that inflation will ease further in the months ahead.
There is also likely to be significant downward pressure on inflation coming from the strength of the euro against sterling. Although this means competitive challenges for Irish exporters, it also serves to make imported goods from the UK cheaper for Irish consumers.
The annual rate of inflation for services was 4.2%, while for goods the rate was 0.4%. The harmonised EU rate of inflation, which excludes mortgage repayments, fell from 2.7% in October to 2.1%.
