Irish inflation slows to 8.9 percent in August but euro-zone gains hit new high

Irish price increases slowed to 8.9 percent year-on-year in August, while euro-zone inflation rose above 9 percent for the first time, according to a flash estimate from Eurostat.

Eurozone prices rose 9.1 percent in August compared to the same month in 2021, driven by food prices, which rose above 10 percent to 10.6 percent for the first time ever.

Energy price inflation slowed slightly to 38.3 percent from 39.6 percent in July, the EU’s statistics agency said on Wednesday.

Annual inflation was 9.6 percent here in July and 8.9 percent in the euro zone.

Monthly euro-zone inflation also rose 0.5 percent from July to August, with groceries the fastest-rising item in the basket.

Inflation in the core eurozone, which excludes volatile energy and food prices, was 4.3 percent in August, still double the EU’s 2 percent target compared to a year earlier.

Details on Irish prices will be available later in the month when the Central Statistics Office releases the Consumer Price Index.

Price increases slowed down slightly in Greece, Spain, France, Cyprus, Luxembourg, Austria and Slovenia and remained unchanged in Portugal.

But inflation is still over 20 percent in Estonia, Lithuania and Latvia and over 10 percent in Belgium, Greece, Spain, the Netherlands, Slovenia and Slovakia.

The European Central Bank is set to hold another rate-setting meeting next Thursday, with traders betting on a 0.75 percent hike – higher than July’s surprise 0.5 percent hike.

Dutch central bank governor Klaas Knot said at an event in Copenhagen this week that rising inflation means the ECB must “act with vigour”.

Ireland’s Fiscal Advisory Council said the government could not fully offset the rising cost of living for households and businesses due to the high cost and the fact that this will further fuel inflation.

Full inflation adjustments for welfare recipients, pensioners and public sector workers would cost nearly €7 billion next year, the same as the entire budget package outlined by the government over the summer.

Even the 2.1 billion euros in spending planned for 2023 will push prices up another 1.2 percent by 2026, IFAC said in its pre-budget proposal today.

Dermot O’Leary, chief economist at Goodbody Stockbrokers, said the pandemic method – in which “the Irish government threw the kitchen sink at the problem with its huge fiscal supports” – was “not appropriate this time around”.

“Considering the unknown duration of the energy spike, the supports should be temporary,” he said.

“However, the full cost of the surge cannot be borne by the government. It may just ease some of the pain for the households and businesses that need it most to survive financially.” Irish inflation slows to 8.9 percent in August but euro-zone gains hit new high

Fry Electronics Team

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