Brian Cowen (Laois-Offaly, Fianna Fail)

First, it should be noted regarding inflation in health and education that these sectors have relatively small weights in the basket of consumer goods and services and, hence, their impact on overall inflation is relatively low. Second, inflation in health partly reflects increases in GP and dentist fees which are outside the control of Government.

Regarding the increases in gas and electricity prices, prices in these sectors are determined by regulators. However, I point out that increases in recent years partly reflect the global increase in oil prices, something over which we have no control.

The Central Bank is forecasting CPI inflation to average 2.75% this year while the ESRI is forecasting 2.6%. The most up to date private sector forecasts are typically in the range of 2.5% to 3.2%. It is clear, therefore, that my Department's forecasts are not out of line with those of other commentators.

Regarding the factors to explain the rise in inflation in February, by raising the level of consumer prices, the rise in interest rates in December had an impact on the annual rate of inflation in February. The same applies to the rise in the level of oil prices during the past year.

Services sector inflation rose to 4.4% in February, which partly reflects the level of demand in the economy. Lowering the inflation rate to that prevailing in our major trading partners is in all our interests and that is the reason I made no changes to indirect taxes in the past two budgets.

The Government, therefore, was doing its bit to reduce inflation. Others have to do their bit also. National wage agreements are important in this regard. We must ensure that wages evolve in line with productivity gains while at the same time facilitating a sustainable evolution of profits. A greater role for competition in the economy is also important. It is the best way to protect competitiveness and safeguard employment.

I caution against reading too much into data for one single month. My Department will update the inflation forecasts in the autumn and account will be taken of all published data and other available information when framing those forecasts.

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