Dáil Éireann Debate, Tuesday - 16 July 2013
297. Deputy Derek Nolan asked the Minister for Finance the analysis that has been done by his Department on the role played by the impact of high inflation, due to lack of control of interest rates, in creating the current economic crisis; the way his Department proposes to deal with a possible recurrence of such high inflation; and if he will make a statement on the matter. [35367/13]
View answerIreland's inflation rate during the boom was high by European standards, with Ireland’s rate of HICP – the comparative measurement of inflation across Europe – on average 1.3 percentage points higher than the euro area average between 1999 and 2007. This served to erode Ireland’s competitiveness; making it more difficult for Irish firms to compete on the world stage and more vulnerable to external shocks. This manifested in a loss of Ireland’s share of world trade from 2002. Looking to the current situation, HICP inflation increased in Ireland by 0.7 per cent year-on-year in June and has averaged just 0.8 per cent over the first half of the year, compared to an average of 1.6 per cent in the euro area. Indeed Irish inflation has now been below, or on par with the euro area average for every month since March 2008. This has led to a significant improvement in economy-wide competitiveness over the period, with consumer prices having improved in relative terms by 14 percentage points compared to the euro area since 2008.
Looking to the future, my Department expects inflation to remain at modest rates for the next few years. Indeed, the European Commission expects Irish inflation rates to be below European rates in both 2013 and 2014.
