The overall price level has hardly risen at all in the past eight months.

This is the most striking aspect of the latest inflation figures from the Central Statistics Office (CSO).

They show that the consumer price index stood at 126.1 in April and 126.5 in December; take away the Budget excise increases and there would have been no increase at all.

As a result of broadly static overall prices, the annual rate of price increase - the headline figures which tend to get the most attention - has dropped from 5.1 per cent in February to 1.9 per cent last month, an extraordinarily rapid drop.

From being a major economic problem, the inflation rate is now looking much healthier, even if the EU harmonised index - the measure used for European comparison which excludes mortgage interest costs - is higher at an annual rate of 2.9 per cent.

It is certainly good news for the Government. Lower inflation boosts real take home pay and the drop in the rate should make it easier to negotiate the pay deal for the second 18 months of the Sustaining Progress pay agreement.

Talks on this commence in March and the current deal for most workers runs out late this year.

As talks on the new pay deal begin, it is possible that the annual rate could be at 1 per cent or less.

Davy stockbrokers believe inflation could drop to 0.7-0.8 per cent in spring, while Goodbody goes for a 1 per cent " trough".

The rate will pick up somewhat later this year, but should average below 2 per cent - the figure could even be below 1.5 per cent if the European Central Bank holds off from increasing interest rates this year, which is possible given the rising euro and the weak euro-zone economy.

The rise of the euro - which lowers import prices - and competition is clearly having an impact in many sectors.

IBEC's chief economist Mr David Croughan points out that clothes prices were down 2.8 per cent on the year and furniture prices dropped 1.5 per cent.

Food prices effectively didn't change on average for the year and overall goods prices were up just 1.1 per cent.

Only the publicans appear to be still coining it, with alcohol prices up 6.4 per cent.

This picture, of course, does not sit easily with consumers' perception of "rip-off Ireland".

There are a couple of reasons for this. First, even though the rate of inflation has eased, the overall level of prices after the rapid price increases of recent years is now well above the EU average - 12 per cent by some estimates.

Second, house prices are excluded from the consumer price index and are a major pressure for many.

And third, service charges are increasing in many sectors. Even though overall service inflation has fallen to 2.8 per cent, many public sector services are increasing more rapidly.

Over the past year, the roll of rises runs to 13.7 per cent for electricity, 10 per cent for gas, 7 per cent for health and 6.5 per cent for education.

These public services are now the key areas of inflationary pressure in an economy where elsewhere price pressures have all but disappeared.