The Central Statistics Office recently published the annual inflation figures for 2011. On a HICP basis, inflation averaged 1.1 per cent while CPI inflation averaged 2.6 per cent. This follows on from two years of negative inflation according to both measures. It should be noted that the Irish rate of HICP inflation (which is used for comparison purposes) was the lowest in the euro area last year. Looking at 2011 costs specifically, most of the upward price pressure stemmed from the pass-through of higher wholesale energy prices and increases in administered charges domestically. In the case of CPI, higher mortgage interest costs were also a significant factor.
With regard to planned increases in costs during 2012, the Budget inflation forecasts factored in all announced increases up to end-November 2011. Taking these and other developments into account it is expected that inflation will remain moderate in 2012, with HICP inflation averaging 1.9 per cent. Interest rate cuts by the ECB in recent months will boost household disposable income and will keep CPI inflation relatively modest. It is expected to average 1.8 per cent this year.