Ireland's inflation should fall for the second month in a row on Friday. Figures are expected to show inflation fell to between 5 and 5.5 per cent in January from 5.9 per cent in December.
Seasonally lower prices for clothing and household goods and budgetary changes that kicked in at the start of the year were expected to contribute to the fall.
Hibernian Investment Managers economist Ms Fiona Adkins said: "The Government estimates a 0.5 per cent cut in headline inflation caused by VAT and export duties."
Ms Adkins predicted inflation could drop to 5.3 per cent in January as cuts in excise duty and unleaded petrol in the 2001 budget and decreases in value-added tax deflated the index.
Falling rising oil prices against a rising trend in the previous year were also expected to shave around 0.3 per cent off the inflation rate, economists said.
Some economists conceded the EU was right last week to voice concern as easing headline inflation figures masked rising domestic costs and pressures.
Economists said growing domestic inflation, coupled with a downturn in the US economy, could lead to further job losses, particularly in the hi-tech sector.
"If I were a US company I would certainly look at scaling back, so Ireland is going to have difficulty," Ms Adkins said.
Reuters