Vol. 571 No. 1
353 Mr. C. Lenihan asked the Minister for Finance his views on the current level of inflation in the economy; and his further views on the way in which downward pressure can continue to be applied in relation to rising prices. [19964/03]
The most recent inflation figures show an inflation rate, as measured by the annual change in the consumer price index, CPI, of 3.2% in August. This was significantly lower than the 5.1% rate of increase in February 2003. The sustained strength of the euro relative to the dollar and sterling, together with the fall in mortgage interest rates and easing domestic pressures should have a positive effect on the rate of inflation for the remainder of the year although oil prices, which have witnessed some increase recently, may exert some upward pressure. The Economic Review and Outlook, published in August revised the budget day forecast for CPI inflation from 4.8% to 3.6% for 2003 as a whole. This updated forecast, as always, was based on the technical assumption of unchanged interest rates.
Tackling domestic inflationary pressures is a priority for this Government. In this context, adherence to the pay arrangements set out under the draft new social partnership agreement, Sustaining Progress, is essential. The anti-inflation initiative agreed by Government, employers and union leaders, to target key domestic sources of inflationary pressure under Sustaining Progress is also important and I look forward to the first formal report of the Anti-Inflation Initiative Group, which is due to be submitted to Government shortly.
I am also of the view that keeping public expenditure on target is essential if our inflation rate is to moderate. My Department will continue to closely monitor spending to ensure that expenditure remains within budget.
