Core Inflation remains unchanged

The release of the April CPI figures from the CSO suggests that deflation is easing.  The headline rate of deflation eased from –3.1% in March to –2.1% in April.  However if remove the effect of two categories

1. Energy Products make up 7.8% of the overall index and rose from 2.7% in the month and are up 9.1% in the year.
2. Mortgage Interest makes up 6.7% of the index and rose 2.9% in the month and is down 0.7% on the year.

Removing these gives us a measure of core inflation we have been following for a number of months.  Although the overall inflation rate has become less negative this core inflation rate is largely unchanged.  It was -2.8% in March and remains –2.8% in April.

The overall index is being pulled up because of increases in energy costs (prices and taxes) because the huge drops in mortgage interest after the ECB rate cuts took place more than 12 months ago and are now out of the 12 month measure of inflation.