The annual rate of inflation dropped sharply to 2.5 per cent in November as the cost of mortgage repayments, rents and fuels declined.
This compares to an annual inflation rate of 4 per cent in October. November saw the largest monthly reduction - of 0.9 per cent - on record, bringing the inflation rate to a 3-year low.
The drop in inflation is expected to continue as recent European Central Bank (ECB) interest rate cuts, the impact of a stronger euro and lower oil prices, take effect.
According to Central Statistics Office (CSO) figures published this morning prices for housing, water, electricity and gas declined by 5.4 per cent last month while transport costs were 2.2 per cent lower, thanks mainly to a fall in oil prices.
Diesel prices dropped almost 10 per cent last month while petrol prices fell 8 per cent as oil prices retreated from summer highs. The price of heating oil dropped over 10 per cent last month.
Over the month of November alone average oil prices retreated from $63 a barrel to $49 a barrel.
Oil has plunged from a high of $147 in July on the back of lower global demand as many of the world's biggest oil consuming nations edge towards recession.
Food prices, which had been rising at an annual rate of more than 9 per cent, are now rising at an annual rate of 4 per cent having risen in November (by 0.5 per cent) for the first time in six months.
With retailers discounting heavily to attract consumers prices for clothing and footwear are down 7.2 per cent on the year although they rose 1.3 per cent in the month.
Alan McQuaid, chief economist with Bloxham said while today's fall in inflation was good news it masked increases in the price of car maintenance, taxi fares and the price of cigarettes due to the excise duty changes announced by the Government in the recent Budget.
"It is hard to believe that inflation was the major concern of many market participants and policy-makers only a few months ago . . . . there is now growing recognition that the combination of a credit crunch and recession is more deflationary than inflationary."
Mr McQuaid said the easing of cost pressures across the economy should see the average inflation rate decreasing to less than 1 per cent next year. "Indeed, the full-year average could be in negative territory for the first time in over sixty years."
Household goods and furnishings prices were 1.9 per cent lower down in the year to November but rose marginally (-0.1 per cent) in the month.
With the octover 0.5 per cent interest rate cut from the ECB taking effect from many mortgage holders for the November 1st repayment, mortgage interest repayments were 8.4 per cent lower last month. Rents dropped by 6.1 per cent.
