Inflation during May was 5.4 per cent, down from 5.6 per cent in April and the high of 7 per cent in November last year, according to the Minister for Finance, Mr McCreevy.

On the EU harmonised index of consumer prices, inflation was at 4.1 per cent in May, down from 6 per cent in November and 4.3 per cent in April. Food and housing were the main contributors to the increase, responsible for 3.2 per cent of the rise in the consumer price index, Mr McCreevy said during Finance Questions. Three other eurozone members had higher inflation rates.

The Minister said he expects inflation to drop in the second half of the year as external factors such as oil price increases and the fall in the euro subside. At Budget time, his Department predicted an annual inflation rate of 4.5 per cent while the ESRI expect a figure of 4.2 per cent and the Central Bank predicted 4.75 per cent.