Falling inflation comes as some relief for households, though in most areas of spending the actual level of prices remains high
The latest decline in euro zone inflation has sparked hope that the increases in ECB interest rates may finally be over Inflationary pressures are easing – and indeed it would be a surprise if they were not, given the extent of the interest rates increases since summer 2022. The latest figures for the euro zone show the inflation rate down to 2.9 per cent in October, the slowest rate of increase since July 2021. The Irish rate – using the EU measure – is estimated at 3.
Falling energy prices are, not surprising, central to the story of easing inflationary pressures, just as they were to the unprecedented rise. Reductions in wholesale gas prices have led to lower prices to the consumer and have also cut the cost of electricity. In Ireland, the first round of consumer cuts from big suppliers – announced about two months ago – are now starting to benefit households. More reductions are likely to follow, on current wholesale market trends, though prices remain significantly higher than their pre-crisis level. And the impact on oil prices of the current turmoil in the Middle East is an unpredictable factor.
. In key areas such as food and energy, we must hope that competition can lead to better deals for consumers. But the cost-of-living squeeze will continue for many through this winter and beyond. The budget package will support households into 2024; beyond that, there is a strong case to focus supports on those who need it.
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