Dáil Éireann Debate, Thursday - 5 October 2023
221. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which inflation is being brought under control, with consequent reductions in the cost of living; and if he will make a statement on the matter. [43447/23]
View answerInflation in Ireland averaged just over 8 per cent in 2022, peaking at 9½ per cent last summer. This September, HICP inflation stood at 5 per cent, representing a decline of 4½ percentage points from last year peak. While these developments represent a significant reduction in inflationary pressures, inflation remains far above the ECB’s 2 per cent target and even further above the ½ per cent rate of inflation recorded on average across the decade preceding the current inflationary cycle.
With wholesale energy markets having eased significantly since last year, households will soon see the benefits with nearly all gas and electricity providers having announced price cuts effective from this November.
The easing in energy inflation is anticipated to further reduce the annual inflation rate, although ‘core’ inflation (excluding energy and unprocessed food) is expected to decline more gradually. Indeed, over the past year, inflationary pressures have become increasingly broad-based and persistent. This reflects widespread capacity constraints in the Irish economy, notably in housing and labour markets, which are becoming increasingly binding.
Since last year, the ECB has rapidly tightened monetary policy in an attempt to bring inflationary pressures under control. Interest rates have now increased by 4½ percentage points since July 2022. Whilst this has been a necessary step to prevent inflationary expectations from becoming de-anchored, this increase in interest rates has had a knock on impact on the financing burden faced by both businesses and households.
Against this ever-evolving backdrop, Government supports have and will continue to play a key role in supporting the most vulnerable in society. The Government has continuously sought to ease the burden of inflation through temporary and targeted supports, whilst remaining conscious not to exacerbate price pressures. In Budget 2024 we will, once again, ensure that budgetary policy is calibrated in a manner which avoids adding to the price pressures in our economy while, at the same time, supporting households and delivering the infrastructure and public services that our society needs.
