Irish HICP inflation rate now amongst the weakest in the euro area

The news that Irish HICP inflation at 1.6% in April is now amongst the lowest in the euro area is welcome, but largely reflects that retail electricity and gas price cuts came later in Ireland than in other European countries. In contrast, services inflation rates of 4-5% point to the risks of bottlenecks and capacity pressures leading to overheating pressures in the indigenous economy. Nonetheless, the fall in HICP inflation below 2% will help Irish households’ real incomes in 2024, driving gains in consumer spending. It is worth remembering official consumer price indices do not explicitly include house prices. Hence, they do not fully capture the negative impact on living standards of inadequate housing supply. Irish house price inflation is currently running at 6%, whereas euro area house prices fell by 1% in 2023.

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Bank of Ireland Economics Weekly 13th May 2024