Inflation jumps to 20-year high of 5.3% as energy prices soar

Irish households are facing a major cost-of-living squeeze this winter, with inflation now running at a 20-year high of 5.3 per cent on the back of soaring energy costs and supply chain disruption linked to Covid.

The latest consumer price index from the Central Statistics Office (CSO), for November, detected a pick-up in price growth in nearly every sector of the economy.

Energy prices remain the chief driver, with electricity, gas and other fuels up 29 per cent on this time last year. The cost of home heating oil has skyrocketed by 71 per cent in just 12 months.

Price comparison website Bonkers.ie said the price hikes could increase annual household energy bills by as much as €1,300.

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The cost of motoring has also risen sharply, with petrol and diesel prices up 26 per cent and 29 per cent respectively. An increase in carbon tax included in October’s budget is expected to add further cost to fuel and home heating prices.

Transport costs are also being driven by higher air fares, which have risen by 65 per cent. Another driver of prices was the cost of housing and accommodation, with rents up by over 8 per cent despite rent controls now applying in most urban areas of Dublin.

Restaurant, hotel and alcohol prices were up by 3-4 per cent. Only one of the 12 categories covered by the CSO’s data – relating to miscellaneous goods and services, which includes insurance – registered an annual fall.

The combined effect drove inflation to 5.3 per cent on an annualised basis in November, the highest level of price growth recorded since June 2001. That is up from 5.1 per cent the previous month and frm just 0.3 per cent in November last year.

EU toolbox

Tánaiste Leo Varadkar said the Government was looking at the EU’s recently announced “toolbox” of measures for member states to tackle the ongoing surge in energy prices. These include emergency income supports for energy-poor consumers and the temporary deferrals of bill payments.

“We’re particularly focusing on electricity because that’s the bill that everyone gets and something that people have to use,” he said during Leaders’ Questions in the Dáil on Thursday.

“We know it’s very difficult for a lot of families who are trying to make ends meet and trying to find enough money to pay the bills at the end of the week or the end of the month,” he said.

Sinn Féin’s finance spokesman Pearse Doherty claimed governments in other countries were being more proactive in shielding poorer households for the current price surge.

“But this Government has done nothing, despite the fact that we in this State have the highest energy prices in Europe and we in Sinn Féin are calling on your Government to wake up,” he said.

US Federal Reserve chairman Jerome Powell has – in recent weeks – signalled a shift in the Fed’s thinking on inflation. He said last week that it was probably time to “retire” the word “transitory” when describing inflation, while suggesting the Fed could accelerate its unwinding of bond purchases that have helped keep longer-term borrowing costs low. A faster tapering could prepare the ground for an inflation-cooling interest rate increases.