Inflation in the Irish economy moderated to 3.4 per cent in June, down from 3.6 per cent the previous month, despite warnings from the International Monetary Fund (IMF) and others that renewed conflict in the Middle East would drive up global inflation.The latest Consumer Price Index (CPI), the State’s official measure of price growth, was compiled last month when US-Iran peace talks had led to a drop in oil prices and a fall-off in fuel costs here.However, relations have frayed again with tit-for-tat attacks posing a renewed threat to global energy supplies.The CPI figures indicated that consumer prices here rose by 0.3 per cent in June compared to a contraction of 0.1 per cent in May.The most significant monthly increases were in the recreation, sport and culture category (+4.3 per cent). This was linked to higher costs for package holidays. The cost of housing, water, electricity, gas and other fuels also rose in June (+0.6 per cent).[ Global economy caught between competing forces of Iran war and AIOpens in new window ]The latter category, which has the biggest weighting in the CPI’s index, accounting for 1.12 per cent of the overall 3.4 per cent, rose mainly due to higher costs for rents and mortgage interest.Private housing rents were up by 0.7 per cent in June and by 4.5 per cent on an annual basis. The cost of mortgage interest was up by 0.5 per cent in June and 7.7 per cent annually.The 9 per cent VAT rate has been welcomed by restaurants but does the hospitality sector actually need it? Listen | 39:12In response to the changed inflation outlook, the European Central Bank (ECB) last month increased interest rates for the first time since September 2023. With ECB policymakers due to meet again in two weeks time, all eyes will be on euro zone inflation data next week.One of the largest monthly decreases in the latest CPI was in the transport category (-0.8 per cent).This was driven by the cost of diesel and petrol which fell by 5.5 per cent and 1.1 per cent respectively in June.However, the cost of these fuels were up by 13.9 per cent and 9.1 per cent on this time last year.The fall-off was partially offset by an increase in air fares, which rose by 3.4 per cent in June.“While the inflation outlook has improved in recent weeks, it remains elevated compared to the start of the year,” Kate English, chief economist at Deloitte Ireland said.“Food inflation is continuing to decline and is at its lowest level since September 2021. However, with the rising cost of fertiliser, it is uncertain if this will hold,” she said.“Lower fuel prices reversed the sharp upward trend seen in the Consumer Price Index in March, yet European gas prices continue to be a concern,” she said, noting rhese have moved upwards over the past week as a heatwave in Europe increases the demand for air conditioning.