Rose Conway-Walsh
Ceist:76. Deputy Rose Conway-Walsh asked the Minister for Finance the estimated level of inflation for 2022; and if he will make a statement on the matter. [21377/22]
Amharc ar fhreagraWednesday, 27 April 2022
Ceisteanna (76)
Freagraí scríofa
Inflation picked up sharply over the course of the last year and in March stood at 6.9 per cent. Almost every advanced country in the world is in the same position, with inflation rates of 8, 7 and 7.4 per cent recorded in the US, UK and euro area respectively in March.
The rise in wholesale energy prices is the key contributor and reflects the rapid rebound in global demand and, more recently, the war in Ukraine. Price spikes have been seen in a range of other commodities as well, including food, fertilisers and metals. Global supply chain disruptions, including the availability of inputs and transport bottlenecks, have also added to inflationary pressures. Domestically, the speed and strength of the economic recovery has led to an imbalance between demand and supply and put additional upward pressure on both wages and prices.
Looking ahead, energy prices increases will continue to be a key driver over the coming months. Inflation is now expected to peak at around 6¾ per cent in the second quarter and average 6¼ per cent for the year as a whole. Pass-through price effects are expected in other sectors such as food (via higher fuel/fertiliser costs) and consumer goods and services (due to higher energy inputs), and will add to core inflation, which excludes energy and unprocessed food, this year. Core inflation is expected to average 3.9 per cent for 2022 as a whole.
The Government is acutely aware of the impact of rising prices on citizens and businesses and has introduced a series of measures in recent months at a cost of over €2 billion to help address the rising cost of living. This included a reduction in the VAT rate to 9 per cent for electricity and gas to end-October, an additional once-off lump sum payment in respect of the fuel allowance, a reduction in the PSO levy, an extension of the reduction in excise duty to mid-October and a €200 electricity credit to all households. However, it must be stressed that expenditure resources are limited, the priority is to
minimise the impact on those who are most affected. The Government can help, but cannot fully insulate all from the burden of higher energy prices.
Given the current dynamics at play, we must remain prudent in our approach – conscious that broad fiscal measures at this point in time could lead to further inflationary pressure which would be counterproductive in nature. My Department will continue to monitor the inflation situation closely and take appropriate actions when necessary.