Vol. 553 No. 5
120 Mr. Penrose asked the Minister for Finance the projected level of inflation for 2002 based on the latest information available to his Department; the way in which this compares with the projected EU average and the figure forecast in his budget speech; and if he will make a statement on the matter. [14501/02]
On budget day inflation, as measured by annual changes in the consumer price index or CPI was projected to average 4.2% this year. The latest available data show that inflation averaged 4.8% in the first five months of the year. While the rate of increase is expected to moderate over the coming months, the budget day estimate for 2002 is under review. My Department will publish an updated estimate in the annual Economic Review and Outlook which is intended to be published during the summer.
In terms of EU comparisons, the appropriate measure of inflation is the harmonised index of consumer prices or HICP. On this basis, Irish inflation averaged 5.0% in the first five months of 2002, compared to 2.2% in the EU. For the euro area, the corresponding average for the first five months is 2.4%. For the EU, the latest EU Commission forecast – spring – was for an inflation rate of 2.1% this year.
Inflation is higher in Ireland than in the rest of the EU partly as a result of domestic cost pressures. It is important that these cost pressures are not allowed to lead to deteriorating competitiveness which would result in higher unemployment. This is why wage moderation, and cost moderation more widely, are so important.
