Inflation jumps to 22-year high of 6.7% in March

Ireland’s cost-of-living squeeze intensified last month with inflation surging to a 22-year high of 6.7 per cent, up from 5.6 per cent the previous month.

This was was sharpest rate of price growth recorded in the Irish economy since November 2000.

It comes on the back of soaring energy and fuel prices internationally and amid a warning from the Central Bank that headline inflation could rise above 8 per cent in the coming months.

The latest consumer price index from the Central Statistics Office (CSO) detected a pick-up in prices in nearly all sectors of the economy in March.

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Energy prices were the main driver, with electricity, gas and other fuels up almost 47 per cent year on year.

Electricity prices were up 22.4 per cent, while gas prices rose 28 per cent. Home heating oil has soared by 126.6 per cent in the last 12 months.

The CSO figures show the cost of motoring has also risen sharply, with petrol and diesel prices up 35 per cent and 46 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 but the Government has promised offsetting measures for lower-income households. The latest figures show airfares have risen by 69 per cent since March last year.

Alcohol

Alcoholic beverages, meanwhile, were up by 7 per cent due to higher prices in supermarkets and off licences, a reflection of generalised price growth and the adoption of new minimum unit pricing for alcohol.

Food and non-alcoholic beverages also increased 3 per cent on an annualised basis due to higher prices across a range of products such as meat, bread and cereals, mineral waters, soft drinks, fruit and vegetable juices, and milk, cheese and eggs.

Food inflation is expected to intensify in the coming months as the second round effects of higher energy costs push up prices in other sectors of the economy.

The European Central Bank has signalled an end to its monetary stimulus programme, paving the way for an increase in interest rates later this year.

Frankfurt's interest rate stance is not expected to be aggressive, however, given sensitivity of the euro zone economy to the war in Ukraine.

In its monthly report, the CSO said prices in the Irish economy have been rising on an annual basis since April 2021, with annual inflation of 5 per cent or more each month since October.

KBC Bank Ireland economist Austin Hughes noted the month-on-month increase in consumer prices between February and March, at 1.9 per cent, was the fastest on record.

“This suggests that momentum in inflation is still building, and with recently announced increases in electricity and gas prices still to be reflected in these data,” he said.

“Unfortunately, inflation looks set to climb higher in coming months. Where precisely it may peak is almost impossible to say given current uncertainties around energy costs but, on current trends, inflation may hit 8 per cent by summer,” he said.

“What seems to be becoming clearer is that current price pressures also seem set to last longer than previously thought,” Mr Hughes said.