Dáil Éireann Debate, Thursday - 1 February 2024
144. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he and his Department continue to monitor economic progress with a view to ensuring that inflation continues to be curbed and that the reduction in inflation is passed on to the consumer by way of lower prices; and if he will make a statement on the matter. [4547/24]
View answer233. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he continues to observe inflationary tendencies in this economy with particular reference to the need to identify their origin; and if he will make a statement on the matter. [4872/24]
View answerI propose to take Questions Nos. 144 and 233 together.
Inflation reached multi-decade highs in 2022, averaging 8.1 per cent with a peak of 9.6 per cent in June 2022 (as measured by the HICP). Whilst the initial driver of this inflationary pressure was a surge in global energy prices it subsequently became increasingly broad based as price pressures spread throughout the economy.
Since the second half of last year, inflation has in general followed a downward trajectory, averaging 5.2 per cent for the year as a whole. Key to this moderation has been the partial reversal of energy prices from extremely high levels. In December 2023 energy prices declined by -9.9 per cent on an annual basis.
While this decline lead to a substantial drop in headline inflation, inflation has spread to all aspects of the economy and core inflation is proving more persistent with an annual rate of 4.3 per cent in December. Core inflationary pressures are expected to remain somewhat more persistent and will ease at a more gradual pace than headline inflation.
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. This reflects the decline in wholesale energy prices feeding into retail prices lowering the price of energy for Irish households. More broadly, the slowing pace of growth in the economy, should allow for an easing in supply and demand imbalances.
This lower level of inflation will be a welcome relief to consumers. However, despite the expected continued decline in inflation it is important to note that the overall price level is not expected to fall back to previous levels.
Throughout this period of high inflation, the Government has been at the forefront in supporting the most vulnerable. By responding swiftly and decisively to the cost of living challenges, the Government has helped to mitigate the impact of inflationary pressures on both businesses and households. The temporary and targeted nature of the measures taken by Government have been designed to avoid adding to the inflationary burden whilst providing support to those most in need.
