The Minister for Finance, Brian Cowen, TD, reacted to the new inflation figures published by the Central Statistics Office which show that the annual rate of inflation – the Consumer Price Index - was 5.2 per cent in January, up from the 4.9 per cent recorded in December. The annual rate of inflation as measured by the EU Harmonised Index of Consumer Prices (HICP) was 2.9 per cent in January. This has reduced from 3.0 per cent in December. The Minister stated that the “the HICP, which is a better measure to compare with our trading partners, has actually fallen this month.”

The Minister stated that these figures are in line with our forecasts in Budget 2007. “We are forecasting the average annual rate of CPI inflation this year will be 4.1 per cent and 2.6 per cent HICP”.

The Minister outlined that the pickup in inflation during the last year is mainly due to external developments, namely increases in interest rates. “We have no control over these. If interest rates changes were removed, CPI inflation would currently be running at 2.7 per cent. Apart from indirect taxes on tobacco (which was done for sound health reasons), I have not raised indirect taxes in the past three years budgets”.

The Minister note that annual services sector inflation is currently running at 9.1 per cent and this is a cause for concern. He commented that “it highlights the need for more competition in the economy as well as for cost restraint in all sectors in order to keep our cost base down.”

In a related development the Quarterly National Household Survey for the fourth quarter 2006 shows that unemployment has fallen from 4.4 per cent to 4.2 per cent. The Minister stated that “in our successful and well managed economy job creation continues to grow apace with a year-on-year increase of almost 86,000 in total employment”.

Ends

22^nd February 2007