Vol. 451 No. 6
39 Mr. D. Ahern asked the Minister for Finance the steps, if any, being taken to prevent inflation rising, thereby nullifying whatever taxation gains there were in the 1995 budget; and the plans, if any, the Government has to dampen down the escalation in house prices. [4931/95]
The 1995 budget was carefully framed so as to minimise inflationary risks, and in this context I would highlight the prudent overall fiscal position adopted and the comparatively modest increases in excise duties. These budgetary decisions, in conjunction with the moderate pay increases provided for under the Programme for Competitiveness and Work, constitute a firm foundation for the maintenance of low inflation.
The consumer price index for mid-February 1995 was released recently. It showed that the 12-month rate of inflation was 2.5 per cent, compared with 2.4 per cent at mid-November 1994. The latest 12-month rate is consistent with my forecast at budget time that inflation in 1995 would average 2½ per cent, representing only a marginal rise on the 1994 outturn of 2.4 per cent. This forecast, to which I still hold, implies that inflation will not rise significantly in 1995, and I do not therefore believe that the taxation gains referred to by the Deputy will be nullified by rising inflation.
The Central Bank, in its Statement of Monetary Policy 1995, reaffirmed that the objective of Irish monetary policy is to sustain low inflation. Given the small and open nature of the Irish economy, exchange rate stability is the key intermediate target for monetary policy. The Central Bank also monitors trends in a range of other price indicators, including asset prices. The Deputy will be aware that the Central Bank, during March, took steps which could be expected to bear down on house prices.
