The Governor of the Central Bank has said action should not be delayed if evidence starts to point to a need for a response to the issue of inflation earlier than expected.

But Gabriel Makhlouf said the judgement that an immediate monetary policy response is not warranted, and that patience is an important and worthwhile virtue, is reasonable and in the present circumstances correct.

"When the evidence changes, we should not hesitate to change our approach," the Governor wrote in remarks published on the Central Bank's website.

Mr Makhlouf said the bank is aware that many people are feeling the price increases experienced over the past few months, particularly across energy and fuel bills.

He said the challenge facing policy makers now is figuring out whether the prices are adjusting to the "ebb and flow of supply and demand in the pandemic environment," or whether the dynamics underpinning inflation have changed, leading to a trend.

"It is clear among all the uncertainty is that the pandemic’s consequences are still being felt across the Irish and euro area economies," Mr Makhlouf said.

"We know the reasons underlying today’s inflation. We believe that those reasons mean today’s inflation is not going to be permanent but we do not know that to the same degree: the economy may respond in ways we do not expect."

He said higher energy prices, a rebound in the cost of goods and services that fell sharply during the pandemic and rising demand coupled with supply chain difficulties are the three main factors driving inflation.

In particular, Mr Makhlouf said energy prices both directly and indirectly impact on how much goods and services cost.

"Inflation affects different people in different ways," he said.

"Lower income households, older people, and rural households are more affected by energy-driven inflation. This is because it represents a larger proportion of their spending compared to other groups."

The Governor said that as well as energy prices, food, non-energy industrial goods and services are also important factors in the inflation index here.

"Increases in food and goods inflation reflect the global factors I have already mentioned, namely global supply and transport bottlenecks," he said.

"Pass-through from higher energy and input costs is also a factor, and will likely continue to be so for several months yet."

"However, the price of services in Ireland has been increasing through the second half of 2021."

Mr Makhlouf said that a world of wage-price spirals is not one we want to return to and that he does not expect us to do so.

"That is mainly because the institutional backdrop today is different," he said.

"We now have an inflation-targeting independent central bank and different wage-bargaining institutions in some countries. In addition, higher inflation rates today should be viewed in the context of a prolonged period of too-low inflation in the euro area."