Headline inflation in the Irish economy has fallen to a fresh low of just 1.1 per cent, according to the latest flash estimate for the harmonised index of consumer prices (HICP). The weaker level of price growth was driven by falling energy prices internationally.
The 1.1 per cent annual rate recorded for August compares with a rate of 1.5 per cent in July and 2.6 per cent for the euro area as a whole. The last time the HICP was this low was April 2021.
The Central Statistics Office (CSO) said energy prices had fallen by a further 0.6 per cent in August, and were down by 9.5 per cent over the previous 12 months.
Food prices were, however, estimated to have risen by 0.1 per cent in the last month and by 2 per cent in the last 12 months. The HICP excluding volatile energy and unprocessed food prices was put at 2.3 per cent in August.
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The Irish numbers will feed into wider euro zone inflation data due out on Friday. The figures are expected to pave the way for another European Central Bank (ECB) interest rate cut in September, the second in four months. ECB president Christine Lagarde has yet to signal either way but other ECB officials have been hinting that conditions, in terms of growth, wages and prices, for a further rate cut have been met.
Frankfurt’s chief economist Philip Lane, however, warned at the weekend that the bank’s goal of getting inflation back to 2 per cent is “not yet secure”, and that interest rates will need to stay restrictive for the time being.
He told the Kansas City Federal Reserve’s annual global symposium in Jackson Hole, Wyoming, that there had been “good progress” so far in taming price pressures across the euro area. Yet, he struck a cautious note about how much relief the ECB will be able to provide borrowers. “The return to target is not yet secure. The monetary stance will have to remain in restrictive territory for as long as needed to shepherd the disinflation process towards a timely return to the target.”
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