Irish prices show sharpest decline
The news comes as figures show European inflation hit a 20-month high in July, mainly due to rising energy prices.
Ireland was one of only two countries to see price decreases in July, with figures showing the rate of inflation at -1.2% in Ireland, as measured by European standards, which excludes mortgage interest relief.
Consumer prices in the 16 countries that use theeuro jumped 1.7% from a year earlier after rising 1.4% in June, as it hit the highest rate since November 2008.
The European Union statistics showed that after Ireland, the second lowest annual rate was recorded in Latvia at -0.7%.
The highest rates were in Romania (7.1%) and Greece (5.5%). However both of these countries raised their VAT rates in July, which pushed prices higher.
On a month-on-month basis, prices in the eurozone fell 0.3% in July and in the wider EU fell 0.2%.
Former ECB forecaster and economist, Laurent Bilke said: “The inflation rate is closing in on the ECB’s comfort zone. Whether the ECB will be worried about it depends entirely on how it thinks the economy will evolve.”
ECB Governing Council member Athanasios Orphanides told Reuters in an interview recently that he’s “not worried” about inflation as the recent increases have been driven by “energy-price swings,” but his colleague Guy Quaden told La Meuse newspaper that the ECB needs to be “more attentive about this issue”.
Energy prices have increased sharply by just over 8% last month, compared to a 6.2% gain in the previous month.
Oil prices have increased 8% over the past two months just as the euro’s recent advance adds pressure on companies to cut prices by making European exports less competitive abroad.
The central bank aims to keep annual price gains just below 2% and president Jean-Claude Trichet said he will announce next month how the ECB will scale back its programme of unlimited loans to banks, a plan the Frankfurt-based bank implemented in 2008.
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