The annual rate of inflation for July has fallen to 4.2 per cent, according to figures released today by the Central Statistics Office (CSO).
This compares with 4.4 per cent in June and 4.7 per cent in May.
Consumer prices, as measured by the Consumer Price Index, fell by 0.4 per cent, the biggest monthly decrease since January 2001.
The CSO said: "The traditional summer sales resulted in lower prices for clothing & footwear and durable household goods".
The EU Harmonised Index of Consumer Prices (HICP) fell by 0.5 per cent for the month and was 4.2 per cent higher on an annual basis. This compares to an annual rate of 4.5 per cent in the year to June.
Chief AIB economist, Mr John Beggs, said: "The inflation rate is gradually slowing but it is slow (the decline) and I think our view has been that the inflation trend is going to be a very slow trend downward."
"We are not looking at a dramatic easing in the Irish inflation rate. We still have underlying pressures that are going to keep the inflation rate high but certainly the fact it is coming down can help the psychology," he said.
Inflation remains at more than twice the European Central Bank's two per cent ceiling and well above the EU’s average of 1.9 per cent.
The CSO said the most significant monthly price changes was an 11 per cent decreases in clothing and footwear. But it noted the price of restaurants and hotels rose with increased prices for meals out.
There were also marginal increases in the price of beer, wine and spirits and higher tariffs for hotel and guesthouse accommodation.
Labour Party Senator Ms Joanna Tuffy said: "Inflation must continue to fall dramatically in the coming months if consumers and social welfare recipients are not to loss out significantly. These figures remain worryingly high particularly in the current economic context." Additional reporting by PA
