Price rises cooled in March after a surprise inflation spike the previous month, but mortgage interest payments, energy and food prices continue to rise.

The consumer price index (CPI) rose 7.7pc last month, compared to a year earlier, the Central Statistics Office (CSO) said on Thursday, down from 8.5pc in February.

The February uptick had ended a three-month run of falling inflation rates, though experts say that is likely to have been the peak.

Forecasters from the Central Bank, Economic and Social Research Institute and International Monetary Fund predict inflation will average between 4.5pc and 5pc this year, down from almost 8pc in 2022.

Housing, energy and food prices were still driving headline inflation in March, the CPI revealed.

Mortgage interest payments were up 35.3pc, compared to March last year. Gas prices rose 85.9pc in the year and electricity prices rose 62.7pc.

Food and non-alcoholic beverages rose 13.1pc, with sugar prices up more than a third, while milk, butter and eggs saw price hikes of more than a fifth on last March.

The cost of going to restaurants and staying in hotels was up 8.9pc year on year, while clothing and footwear prices rose 6.7pc.

Prices rose 1.1pc in the month between February and March, led by transport costs.

Households will continue to feel the pinch even as inflation cools, according to experts, as wage rises fail to keep up with prices.

"Many people simply do not have any financial cushioning to fall back on and, with families expected to pay upwards of €1,000 on their grocery bill this year due to the soaring costs of household staples, the number of people facing financial difficulty will continue to grow,” said Paul Walsh chief executive of Peopl Insurance.

Half of all respondents to a recent Peopl survey said they would not have the cash on hand or within a month to pay off an essential bill of €3,000 if it arose.

The latest Credit Union Consumer Sentiment Index found that 35pc of consumers are struggling financially.

While Irish prices were rising faster than the rest of the EU last year, they were closer to the eurozone average of 6.9pc for March, according to a flash estimate from the bloc’s statistics agency, Eurostat.

Eurostat - which measures a slightly different basket of goods and services to the CPI - estimated annual Irish inflation at 7pc in March, down from 8.1pc in February.

But eurozone core inflation, which strips out volatile food and energy prices, hit a new eurozone record last month, meaning further European Central Bank (ECB) rate rises are on the cards.

The ECB is, however, weighing a slowdown in hikes after six successive rises took its main lending rate to 3.5pc and its deposit rate to 3pc. The next rate-setting meeting is on May 4.

Central banks in the UK and US are looking at a pause in hikes. US data out this week showed inflation slowed to 5pc in March, its lowest reading in almost two years, while the Bank of England’s chief economist said UK price hikes could slow sharply this year.