Dáil Éireann debate -
Wednesday, 28 May 2003

Vol. 567 No. 6

Written Answers. - Price Inflation.

Róisín Shortall

Question:

71 Ms Shortall asked the Minister for Finance the projected level of inflation for 2003 based on the latest information available to his Department; the way in which this compares with the projected EU average; the impact he expects the anti-inflationary measures agreed in the recent national talks to have on the CPI; and if he will make a statement on the matter. [14661/03]

Minister for Finance (Mr. McCreevy)

My budget day forecast for CPI inflation of 4.8% this year was based, as always, on the technical assumption of unchanged interest rates. Since budget day, the ECB has twice cut interest rates, and this, together with the appreciation of the euro and the decrease in oil prices, will have a favourable impact on the CPI this year.

The annual rate of inflation fell to 4.3% in April. This was in line with the expectation that inflation would moderate over the course of this year. My Department's revised inflation forecast will be published as is customary in the economic review and outlook later in the summer.

In terms of EU comparisons, the appropriate measure of inflation is the harmonised index of consumer prices, HICP. The HICP inflation for Ireland for 2003 as a whole was forecast to be 4.2% on budget day. The Commission's spring forecast estimated that euro area inflation would average 2.1% this year.

Bringing our rate of inflation down towards that of our EU partners is a priority for the Government. This must be done in order to safeguard our competitiveness and avoid losing jobs. That is why the Government made the commitment in Sustaining Progress to work together with the social partners to exert downward pressure on inflation. The anti-inflation initiative is part of this process and the Government agreed that proposals for action would be co-ordinated by a specially convened group.

I look forward to the anti-inflation initiative group's report which is due by the end of the summer. I am confident that, working together in partnership, we will address the issue of domestic price pressures in the Irish economy to bring inflation down.

In this context, the implementation of the moderate pay arrangements set out under Sustaining Progress is also vital. I am also of the view that keeping public expenditure on target will be important if our inflation rate is to moderate and I have put in place management and control mechanisms to this end.