Brian Lenihan Jnr (Dublin West, Fianna Fail)
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My Department regularly updates its estimates for inflation as price developments occur and will next publish a revised estimate in the context of the Stability Programme Update which will be submitted to the European Commission in April of 2011. I would like to point out that Ireland is in a unique position in the European Union in that prices are continuing to fall - down 0.8% on a Harmonised Index of Consumer Prices (HICP) basis in November 2010 - while inflation across all other European Member States is positive.

My Department is forecasting an increase in consumer prices this year on foot of base effects, commodity price movements and the modest indirect tax measures being implemented as part of the budget. However, given muted domestic demand and considerable spare capacity in the economy, price increases are likely to be fairly modest – the HICP is projected to increase by 0.7% this year.

I note that preliminary estimates of eurozone inflation for December were somewhat higher than expected, with an increase of 2.2% compared to an increase of 1.9% in October and November. However a considerable portion of this headline inflation relates to energy price increases while core inflation has remained steady at about 1%. Of course, wholesale energy price increases impact on Ireland as they do on the rest of Europe and my Department monitors energy price developments closely and will make amendments to its forecasts as appropriate.

What we should focus on, however, is the positive impact that the inflation differential between ourselves and our main trading partners is having on Ireland's competitive position. As set out in the National Recovery Plan 2011-2014, exports will be the key driver of economic growth over this period. Accordingly, this improvement in price competitiveness will provide crucial support to sustained economic recovery.