Vol. 503 No. 3
93 Mr. M. Higgins asked the Minister for Finance if he will comment on the April CPI; his views whether there is any reason to change his budget day inflation projection; and if he will make a statement on the matter. [10212/99]
I presume the Deputy is referring to the March CPI which was published on 13 April. The year-to-year increase in the consumer price index fell to 1.4 per cent in March from 1.6 per cent in February and has fallen from its peak of 3.2 per cent last August. However, this headline inflation rate has benefited from the recent cuts in mortgage interest rates. Excluding mortgage interest costs, inflation was 2.4 per cent in March compared to 2.6 per cent in February and has been around 2.5 per cent since last November.
While the reduction in inflation in recent months is welcome, it is important to remember that inflation has been falling in our trading partners also. As measured by the EU Harmonised Index of Consumer Prices, inflation here was 2 per cent in March compared with about 1 per cent for the EU as a whole.
With international inflation very subdued, the latest figures data suggest the existence of domestic inflationary pressures in the Irish economy. In the year to March there have been increases in food prices of 4.5 per cent and in services and related expenditure of 4.4 per cent. The increase in food prices probably reflects once off factors which should gradually unwind. However, the increase in services inflation suggests that domestic inflationary pressures remain a cause for concern.
It is essential that wage and other cost developments, in the context of social partnership, continue to support low inflation.
As regards the forecast for the year as a whole, I do not envisage changing my budget day forecast at this stage. As the mortgage interest rate reductions drop out of the year-to-year comparisons, the baseline inflation rate is likely to pick up in the second half of the year. Updated economic forecasts, including a projection for inflation, will be published as usual in mid-year.
