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Irish Inflation Hits 4-Year High

Inflation in Ireland has reached a four-year high of 4.9%, the government's Central Statistics Office reported Thursday, citing a surge in mortgage and fuel costs as well as a hike in tobacco taxes.

The rate for December represented a monthly rise of 0.3% in prices, driven chiefly by the impact of higher interest rates set by the European Central Bank.

Inflation last exceeded 4.9% in January 2003 and is emerging as an election issue in Ireland, where a national wage-pact agreement is keeping workers' pay rises below the current rate of inflation. The 9-year-old government of Prime Minister Bertie Ahern faces re-election in mid-2007.

Overall in 2006, the report said Irish inflation averaged 4.0%, another four-year high, compared to 2.5% in 2005. It said mortgage costs rose 31.5% over the year because of the impact of five rate hikes by the Frankfurt-based central bank, which sets rates throughout the 12-nation zone that uses the euro.

Richard Bruton, finance spokesman for the main opposition Fine Gael party, said the European interest rate rises should be suppressing inflation on other fronts, but government-controlled parts of the economy were suffering unjustifiably high increases in prices. He said Ireland's prices rose 26% more than the euro-zone average.

The cost of natural gas, the fuel most commonly used to heat Irish homes, rose 27.5% in 2006, reflecting a major rate hike by the state-controlled gas company. A similar hike from the state's electricity generator is expected to hit this month.

Cigarettes and other tobacco products rose 7.3 percent in December because of a higher tax rate.

Prices for shoes, clothes, furniture and telecommunications recorded minor drops over the year.

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