Seán Haughey
Question:78. Deputy Seán Haughey asked the Minister for Finance his Department's forecast for headline inflation in 2023 and for 2024; and if he will make a statement on the matter. [21478/23]
View answerTuesday, 9 May 2023
Questions (78)
Written answers
Almost all advanced economies have faced multi-decade high rates of inflation over the past year and Ireland is no exception. Consumer price (HICP) inflation averaged just over 8 per cent last year, compared to around ½ per cent in the preceding decade.
The easing of wholesale energy markets over the last number of months suggests that inflation has passed its peak and is on a downward trajectory. While inflation remained elevated at 6.3 per cent in April, it has eased back significantly from the peak of 9.6 per cent reached last summer.
My Department published updated inflation projections as part of the Stability Programme Update (SPU) in April. Inflation is expected to continue to ease over the course of the year, primarily as a result of energy prices, and is projected to average 4.9 per cent for the year as a whole. For next year headline inflation is expected to moderate further to 2.5 per cent. Despite the easing in the rate of inflation, the price level consumers face will remain elevated.
Despite this, the inflation outlook remains highly uncertain at present and the risks to the Department’s baseline inflation projections are two-sided in nature. To reflect these risks the Department published two alternative scenarios as part of the SPU.
Under the downside - or lower inflation - scenario, the recent easing in wholesale energy prices are assumed to be passed-through to retail gas and electricity prices more quickly than expected. Inflation in this scenario would average 4.4 per cent this year and 1.6 per cent next year.
Under the upside – or higher inflation - scenario, inflation could prove more persistent reflecting higher-than-assumed movements in the wholesale energy markets and greater wage pressures given the tight labour market conditions. Under this upside scenario in this scenario would average 5.8 per cent this year and 3.3 per cent next year.