Dr. Conor O'Toole:

There are a range of factors affecting inflation. There are a number of components we typically take into consideration when we are trying to forecast or explain the inflation rate. One is domestic wage rates, how fast they are growing and how much are they contributing to the domestic price pressures. We would also take import prices, like what the Deputy was talking about there, namely, that basket of prices that come from outside into Ireland and see what sort of effect they would have. They are much more impactful, certainly, on goods than on services. Services are much more likely to be domestically driven inflation. We saw inflation really come down quite rapidly through the end of last year, stop around October and then take off again. One of the risks we see is that when there is such a prolonged period with a low employment rate - a full-employment context - and external factors maybe washing out, like some of the energy price factors Dr. Lynch was talking about coming out of the inflation basket, which used to be increasing and are now kind of stabilising, and wages are growing so rapidly, there is a risk that will feed back into domestic prices and we could have that upward pressure on the price level from that low unemployment capacity constraint. That is certainly a risk we mentioned in our last commentary. We see it as a real risk.