INFLATION in the US has a greater impact than that of Britain on the rate of Irish inflation new research suggests.

According to Dr Dan McLaughlin, chief economist at Riada Stockbrokers, 96 per cent of Irish prices can be accounted for by US prices and the pound/dollar exchange rate. The effective exchange rate, or trade-weighted rate, has also been influential, the research finds.

In contrast, since 1993, only 85 per cent of Irish inflation can be explained by a combination of British inflation and the effective exchange rate.

Dr McLaughlin also found that credit growth has no influence on Irish inflation.

The findings mostly support research from the Central Bank. The Bank has consistently argued that the trade weighted exchange rate is far more important than the sterling/pound rate.

However, it is at odds with recent research from the ESRI which found that 60 per cent of any change in British inflation and 33 per cent of any change in the pound/sterling rate feeds into Irish inflation within six months.