Irish prices rise nearly 7 percent in March as the war between Russia and Ukraine sparks an energy crisis


Irish prices rose more than a point to 6.9 percent in March, according to a flash estimate by the EU statistics agency today, while prices in the euro-zone rose 7.5 percent.

Inflation in Ireland in February was 5.7 percent according to the EU harmonized indicator (5.6 percent according to the Irish consumer price index) and reached 5.9 percent in the euro zone in the same month.

KBC Ireland chief economist Austin Hughes said price increases here were likely driven by energy costs, reflecting a trend in the rest of the 19-member single currency zone.

He said Irish inflation could “hit above 7 per cent in April” and put pressure on the government to step in again to help welfare recipients and curb wage inflation.

“We may also see signs of widening pricing pressures as higher energy costs translate into higher prices elsewhere,” Hughes said.

“How high they rise depends heavily on global fuel prices, but a further rise is already ingrained.

“These numbers add significant pressure on the Irish government to introduce a ‘mini-budget’ both to cushion those least able to cope with the price hike and to see that they act to reduce the risk of a domestic wage-price spiral.”

The Economic and Social Research Institute has forecast prices here could rise by as much as 8.5 percent by the summer and recently trimmed its economic growth forecast due to the turmoil in Ukraine.

Irish inflation is below the euro-zone average, which rose to 7.5 percent in March, a new euro-era high.

Energy prices in the euro zone rose 44.7 percent for the month from 32 percent in February, with food, alcohol and tobacco rising 5 percent from 4.2 percent in February.

Underlying inflation, excluding volatile energy and food prices, was 3 percent in March, above the European Central Bank’s target of 2 percent.

Inflation in the Netherlands rose to 11.9 percent last month, with double-digit price increases also recorded in Estonia, Latvia and Lithuania. Price increases in Belgium, Spain and Slovakia also approached 10 percent.

Bert Colijn, ING Bank’s chief eurozone economist, said inflation in the 19-member currency zone could spike in double digits if the war in Ukraine drags on.

Higher wages would feed into prices “a little quicker” as a result of the war, he said, while Covid lockdowns in China are causing supply disruptions again and driving up costs even further.

He predicts that euro-zone inflation will average 6 percent or more this year, compared to the European Central Bank’s latest forecast of 5.1 percent, and is putting pressure on the ECB to hike interest rates.

Russia’s invasion of Ukraine has put additional pressure on energy, food and metals prices.

Oil prices slipped below $100 a barrel on Friday as the US ordered an unprecedented release of strategic reserves to tame runaway prices.

Natural gas prices fell, after rising as much as 5.6 percent earlier on Friday, amid concerns over Russia’s threat to switch payment for its energy supplies to rubles.

The European Commission this week raided Russian gas companies in Germany over allegations that Mr Putin has been holding back supplies since last year despite rising demand in Europe.

Irish consumers could face yet more energy price increases due to volatility after Electric Ireland recently enacted electricity and gas prices and Bord Gáis hikes are due to start on April 25th. Irish prices rise nearly 7 percent in March as the war between Russia and Ukraine sparks an energy crisis

Fry Electronics Team

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