Helen Keogh
Ceist:53 Ms. Keogh asked the Minister for Finance the likely effect on the Consumer Price Index of the recent devaluation.
Written Answers. - Devaluation Effect on CPI.
The outlook for 1993, at this point, is for an average increase in the Consumer Price Index of the order of 3½ per cent compared with 1992.
The House will be aware that the recent devaluation of the Irish pound had been preceded by an effective, roughly equivalent, appreciation in preceding months as the value of sterling, the lira and certain other currencies declined. The effective exchange rate of the Irish pound stood at 67.71 this morning compared with an average level of 67.81 over the first half of 1992. There should be no appreciable effect on inflation therefore, through import prices on average despite the overall evolution of currency parities in recent months, compared with what might have been expected had previous currency parities been maintained.
However, developments on currency markets did have the effect of pushing domestic interest rates upwards late last year. While not a consequence of the Irish pound's devaluation — it contributed, instead, to a lowering of prevailing interest rate pressures — that increase in interest rates will affect 1993 and is incorporated in the estimate of 3½ per cent. Exclusive of interest rate developments — the basis used to measure inflation in many countries — the prospect is closer to 3 per cent.