Dáil Éireann Debate, Thursday - 1 February 2024
229. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which measures introduced in this jurisdiction to combat such issues as inflation, here and-or throughout the eurozone, are being successful; and if he will make a statement on the matter. [4868/24]
View answerIreland alongside all other Eurozone countries has experienced multi-decade high rates of inflation. Whilst inflation in Ireland peaked over the summer of 2022 at 9.6 per cent, inflation in the Euro Area peaked later and at a higher rate (10.6 per cent in October 2022). Whilst the initial driver of the inflationary pressure was a surge in global energy prices it subsequently became increasingly broad based as price pressures spread throughout the economies.
To combat these high rates of inflation, the ECB raised interest rates at a record pace, with the main refinancing rate reaching 4.5 per cent in January, from zero for much of the past decade. Whilst this has been a necessary step to prevent inflationary expectations from becoming de-anchored, the increase in interest rates will have knock on implications for the financing burden faced by both businesses and households. Indeed, higher mortgage rates to households and cost of capital firms are expected to act as headwinds to growth in the year ahead.
Throughout this period of high inflation the Government has provided timely support to households and businesses. Many of the fiscal supports enacted have been temporary and targeted in order to help those most in need without exacerbating price pressures or impeding the ECB’s efforts of returning inflation to target.
I am happy to report that we appear to have turned a corner on inflation, though the path to price stability may not be smooth. The latest data suggests that inflation in Ireland was at 3.2 per cent in December of last year, an uptick on November, while it was at 2.9 per cent for the euro area. Despite some potential volatility, my Department expects the downward trajectory in inflation to continue throughout 2024. At the time of Budget 2023, the Department forecast average headline annual inflation of 2.9 per cent for this year.
