Inflation in the Irish economy softened to 2.2 per cent last month, the lowest rate recorded in almost three years, as energy costs internationally continued to decline.
It is the fifth monthly decline recorded in headline inflation this year.
However, the latest consumer price index (CPI) collated by the Central Statistics Office indicated the underlying rate of price growth, which excludes volatile energy and food prices, remained elevated at 3.1 per cent in June, keeping pressure on households.
The index showed prices on a monthly basis rose by 0.4 per cent.
Last month the European Central Bank (ECB) cut interest rates for the first time since the energy price shock triggered by Russia’s invasion of Ukraine. However, it has remained tight-lipped about any further moves.
Markets have priced in at least one more ECB rate cut this year.
The latest Irish CPI showed electricity and natural gas prices were down by 20.7 per cent and 19.6 per cent respectively, reflecting the fall-off in oil and gas prices globally. However, the CPI showed transport prices were up by almost 5 per cent year on year, reflecting increases in the cost of diesel (+12.8 per cent) and petrol (+9.3 per cent).
Prices in restaurants and hotels were also found to have increased on an annual basis, rising by 4.4 per cent.
Conversely, the cost of clothing and footwear was down 6.7 per cent while prices in furnishings, household equipment and routine household maintenance were down 1.1 per cent.
“While the slowdown in inflation will be a relief to many consumers, there are many areas where inflation is still running well above average, such as in transport, restaurants and hotels, and recreational and cultural services,” said Paul Walsh, spokesman for Peopl Insurance.
“Furthermore, double-digit inflation was recorded for health insurance, certain grocery items – such as potatoes and olive oil – and diesel prices.”
Separately, US inflation fell faster than expected to 3 per cent in June, reinforcing views that the disinflation trend was back on track and drawing the Federal Reserve another step closer to cutting interest rates.
The US CPI dipped 0.1 per cent last month after being unchanged in May, the US Department of Labor’s Bureau of Labor Statistics said on Thursday. It was the second straight month of tame CPI readings, and could help bolster confidence among officials at the US central bank that inflation was cooling.
[ Euro zone inflation slows to 2.5%Opens in new window ]
In the 12 months through June, the CPI climbed 3 per cent and followed a 3.3 per cent advance in May. Economists polled by Reuters had forecast the CPI ticking up 0.1 per cent and gaining 3.1 per cent year on year.
Economic growth has also slowed in response to the central bank’s hefty rate hikes in 2022 and 2023, with second-quarter gross domestic product forecast near the 1.8 per cent annualised rate that policymakers view as the non-inflationary growth pace.
Federal Reserve chairperson Jerome Powell has acknowledged the recent improving trend in price pressures, but told lawmakers this week he was not yet ready to declare inflation had been beaten and that “more good data would strengthen” the case for rate cuts.
– Additional reporting: Reuters
