Inflation pushes sharply into negative territory

Consumer price inflation here fell by a dramatic 0.9pc in May according to a first estimate by European Statistics Agency Eurostat.

This was the second successive month of negative inflation for Ireland and far larger than last month’s minus 0.3pc.

For the Eurozone as a whole, annual inflation is expected to be 0.1pc, down from 0.3pc in April, Eurostat said.

There are however issues with how the basket of used to measure inflation is made up.

In Ireland, the Central Statistics Office collects approximately 53,000 prices each month, but these reflect pre-Covid consumption patterns, so recreational and cultural services, which includes the closed cinemas, still accounts for almost 4pc of the price basket while the now-deserted rail and bus networks of Ireland are part of a transport services index that is worth nearly 2.6pc of the index.

The dramatic push lower in inflation looks set to continue and to keep interest rates in the Eurozone nailed below zero as the European Central Bank will once more fall well short of its 2pc inflation target.

That means Irish mortgage rates will also remain low.

“With economic output set to remain below pre-virus levels for the next couple of years, the ECB will keep policy ultra-loose for the foreseeable future,” said Jessica Hinds, European Economist at Capital Economics.