Inflation in the Irish economy fell to 2.7 per cent in January, down from 3.2 per cent the previous month, providing partial comfort for cash-strapped households. This follows two months of increases in the headline rate of price growth.
The downturn detailed in the Central Statistics Office’s (CSO) latest flash estimate for the harmonised index of consumer prices (HICP) comes amid a significant decline in energy prices internationally, which had driven inflation lower in recent months.
Inflation was estimated to have fallen by 1.4 per cent month on month, the CSO said. Energy prices decreased by 0.8 per cent since December and by 7 per cent on an annual basis. Transport costs, including air fares, were also down by 4.5 per cent in the month.
Food prices were estimated to have decreased by 0.2 per cent in the last month but to have increased by 4.3 per cent in the last 12 months.
The HICP excluding energy and unprocessed food, a measure of underlying inflation, is estimated to have increased by 3.8 per cent since January 2023.
The Irish numbers will feed into wider euro zone inflation data due out on Friday, which is also expected to show a decline in inflation for January after an uptick in December.
The figures are likely to fuel speculation that the European Central Bank (ECB) could start cutting interest rates in the next few months as markets are forecasting.
ECB policymakers are, however, concerned that elevated levels of pay growth as workers seek a restoration in real income may keep inflation above its 2 per cent target rate for longer.
While the HICP is used to allow comparisons across euro zone countries, the official measure of Irish inflation is the Consumer Price Index (CPI). That put the headline rate of inflation in Ireland at 4.6 per cent in December.
