Higher mortgage rates, oil costs push inflation to 6.3%

September 9, 2023

Inflation rose at an annual rate of 6.3% in August, up from 5.8% in July, according to the latest Central Statistics Office figures.

Inflation took a step in the wrong direction last month with the increase mostly driven by higher mortgage interest rates and higher prices for home heating oil and motor fuels.

The recent increases in food prices stalled on average and the annual rate slowed to 7.7%.

But the price of services continues to edge up. The overall annual rate of service inflation was 7.3%.

Prices for package holidays, although discounted in August, are 58% higher compared to a year ago.

Hairdressing, home insurance and health insurance are also higher. Motor insurance, which had seen falls in recent years, also edged up last month.

Prices in restaurants, bars and hotels are all higher than a year ago and are up by around 6% on average.

While recent announcements by energy companies of long-awaited falls in electricity and gas prices will be welcomed, the reverberations of last year’s energy price shock still seem to be rumbling on.

Today’s CSO figures show that the Consumer Price Index was up 0.7% on a monthly basis, compared to a rise of 0.2% the previous month.

Minister for Finance Michael McGrath has said the overall trend over time had been downward pressure on inflation, and he anticipated that trend would continue over time.

He said it was important not to read into data from one month as “it is the trend over a number of months that really matters.”

“We will keep this under very careful review now over the next number of weeks leading up to the decisions that we have to make in the budget, in particular around the cost of living supports.

“We do believe that households will need some additional help in the budget in relation to temporary or one off measures to assist them with the cost of living,” Minister McGrath said.

He added that the reduction in energy prices are very welcome, but said they only go a small way to offset the increases seen over the last 18 months.

“And so we will take on board where we are at with inflation, where we are at with energy prices being charged to consumers when we make the decisions in the budget about what is the right blend, the right mix of supports for households, but there will be supports for people coming in a number of weeks’ time once we announce the budget”.

A report published yesterday by the Central Bank stated that Government interventions last year to assist households with the rising cost of living appear to have added to demand, helping to push up inflation.

However, today, Minister for Public Expenditure Paschal Donohoe said that is not the case.

“We are seeing inflation in some parts of our economy still higher than we would want, but public expenditure growth has not been higher than the rate of inflation within our economy. So if it is having an effect on inflation levels, I think it’s going to be on a low level,” he said.

“The very reason we had a series of one-off measures is so that we could avoid big permanent expenditure increases that might have a bigger effect on inflation within the economy.”

Minister Donohoe said the big ticket items that were designed to help people with the cost of living were one offs in November, December, January and February.

He said “any effect that they might have had on inflation, if they did have one is well worn out of the figures by now. So overall I don’t believe it’s having a contributory effect on inflation at the moment.”

Article Source: Higher mortgage rates, oil costs push inflation to 6.3% – Robert Shortt – RTE

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