DAVY VIEW

Headline inflation moderated to 3.5% this month, in line with our latest forecast. However, core inflation was faster than we expected at 2.8%, mainly as a result of services inflation – which picked up to 3.7%. Some of this could reflect good weather and an early seasonal boost that is typically seen in June and July. However, there is clearly further upside to inflation likely over the summer months, with food and energy price increases probable. For example, Electric Ireland announced an increase of c.8% to gas and electricity prices that will take effect from July.