The annual rate of inflation has hit its highest level for 22 years.

The latest CSO figures show that prices rose by 6.7% in the year to March.

Meanwhile the increase of 1.9% between February and March was the largest in 25 years.

The annual increase is the largest since November 2000, when inflation hit 7%.

The annual rate of inflation. Image: CSO

The largest increases were recorded in transport, which rose 18.7% - mainly due to the rise in the cost of petrol, diesel, cars and services.

Meanwhile, housing costs like electricity and gas increased by nearly 17.5%, again due to rising fuel costs as well as rising rents and mortgage interest repayments.

The Tánaiste Leo Varadkar, 20-03-2022. Image: Sam Boal/RollingNews

Speaking in the Dáil this afternoon, the Tánaiste Leo Varadkar warned that introducing pay rises across the economy could actually make the cost-of-living crisis worse.

He said the government is considering pay increase in the public sector - but insisted pay rise alone will not solve the issue.

“It is a mistake to think that pay rise will solve the problem of inflation,” he said.

“Pay rises won’t bring down the cost of living. In fact, some pay rises may even further increase the cost of living because a lot of businesses will have to fund those pay rises by increasing what they charge their customers for goods and services.

“So, you want to have pay rises but not pay rises that contribute to inflation and make the situation worse.”

Inflation comparison. Image: CSO

Austin Hughes, Chief Economist with KBC Bank Ireland, told Newstalk that some of the price increase over the last year have been extraordinary.

“The details are even more eye-watering,” he said.

“You have a jump 58.5% month to month in home heating oil – that is 126.6% higher than a year ago.

“You know, it is quite extraordinary. Motor fuels are 40.4% higher than a year ago.”

Meanwhile the cost of cigarettes and alcohol increased by 7%, while restaurants and hotels are 3.65 more expensive than they were a year ago.