By Andrew Bushe
DUBLIN — Inflation reached an annual 4 percent in January — the highest in a decade — according to figures released on Tuesday by the Central Statistics Office.
The figure is above what many economic analysts had expected. The yearly rate to December had been 3.4 percent, mainly due to a 50p increase in cigarettes in the budget.
The monthly consumer price index actually fell by 0.2 percent in January, but the fall had been expected to be higher as the post-Christmas sales usually bring the figure down.
However, while the sales led to a fall in the cost of clothing and footwear (down 12.1 percent) and household goods (down 3.5 percent) this was partially offset by higher mortgage repayments (up 1.2 percent), transportation (up 0.9 percent) and energy prices (up 0.8 percent).
While the economy is booming, there are fears that a tight labor market, with unemployment below 5 percent, may boost inflation further.
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The government has no power to raise interest rates to combat inflation as the economy is subject to monetary policy set by the European Central Bank as a result of its membership of the EMU.