Brian Cowen (Laois-Offaly, Fianna Fail)

Inflation, as measured by annual changes in the consumer price index, CPI, was 3.8% in April. A large part of the recent pick-up in the annual inflation rate is owing to external factors such as higher oil prices and interest rate increases by the European Central Bank.

On budget day, my Department forecast that CPI inflation would average 2.7% in 2006. That forecast was based on the usual technical assumption of unchanged interest rates. My Department will publish updated forecasts in the autumn.

On an EU basis, Ireland's harmonised index of consumer prices, HICP, was 2.7% in April, compared with 2.4% in the euro area. Ensuring that our inflation rate moves back towards the euro area rate is important to our remaining competitive.

Maintaining a moderate rate of inflation remains a key priority of economic policy because of its importance to competitiveness. The Government is doing its bit to contain inflation by implementing responsible fiscal policies. In addition, we have not increased excise duties for the last two years, and we are promoting greater price competition by removing the 1987 groceries order. We are also seeking a reasonable wage deal to maintain and improve our international competitiveness. We are investing in public infrastructure that will enhance our ability to produce more goods and services and keep inflation down in the process.

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