The forecast may have to be revised mid-year but I see no reason at this stage to revise any of the forecasts in my Budget Statement. Some economists think I do not pay much attention to them — and maybe I do not in some of my utterances — but I wish to refer to interesting comments on inflation and the components of the CPI made by Mr. McLoughlin of ABN AMRO which did not receive wide coverage. These comments may be of interest to Members and those who are trying to hype up the level of inflation. In his market document of 16 January he said:
Looking at the inflation side, one point to remember is that over 40 per cent of the consumer price index is composed of items whose price is determined by Irish wages and not the exchange rate. This includes housing, insurance, repairs etc. , services, for example, hairdressing, postage, telephones, transport, shoes and light. Food and drink account for another 35 per cent and well over half of this will be home grown. So the direct component of the consumer price index most exposed to the weak punt-sterling rate is durables, clothing and footwear and other goods with a total weight of 16 per cent.
That is the make up of the consumer price index. While the value of the Irish pound vis-à-vis sterling has a weighting in the composition of the CPI, it is not as great as some commentators might lead us to believe. I have never met Dr. McLoughlin nor has he ever communicated with me. Neither am I given to quoting economists very often; some of them believe I do not listen to them. However, it is important he elaborated on the composition of the CPI. It was of interest to me, but I did not see much coverage of it in the national press at the time.