NEW European Union index of consumer prices across Europe shows Irish inflation running at 2.3 per cent at the end of last year. The figures indicate that 11 of the 15 EU states met the Maastricht inflation criteria in December 1995.
The interim index of consumer prices (IICP) is the first step towards a harmonised index of consumer prices which it is hoped will be up and running from the beginning of next year.
Ireland had the seventh highest inflation rate in the EU in 1995 when measured by the IICP.
The highest inflation recorded was in Greece at 7.9 per cent followed by Italy at 5.9 per cent.
These two states along with Britain and Portugal did not meet the Maastricht criteria, which are that inflation should be no more than 1.5 percentage points higher than the average of the lowest three EU states.
Finland had the lowest inflation at 0.3 per cent followed by the Netherlands at 0.8 per cent and Luxembourg at 1.3 per cent. The average among the lowest three was 0.8 per cent, setting the Maastricht ceiling at 2.3 per cent.
A worsening of this trend would give the authorities plenty to think about in terms of monetary policy, according to a commentary from Bloxham Stockbrokers.
It warns that, while there is little danger of Ireland not meeting the Maastricht inflation criteria, the new inflation measure will become a key factor in Central Bank decisions. "A higher inflation rate than our EU partners, if maintained over the next few months, may lead to a tightening of monetary policy sooner than we expect," the brokers said.
The IICP measures about 85 per cent of the basket of goods and services in the All Items Consumer Price Index, usually used by the Government.
Analysts expect the market will start to shift to the new index in the run up to January 1st, 1999.
The index excludes mortgage interest repayments as well as health and education costs, which form part of the Irish CPI. As a result it is slightly below the official inflation of 2.5 per cent measured by the CPI but it is likely to show Irish inflations in a less favourable light in the future.
