FINANCE MINISTER MICHAEL McGrath has said that the rate of inflation has peaked in Ireland.

The latest figures from the European Central Bank show the rate of inflation dropped further than expected, though inflation when energy prices were excluded remained high.

“It is our view now … that inflation has actually peaked and is now on a downward trajectory,” McGrath told RTE’s News at One today.

“There is always, of course, the caveat of another energy price shock, for example associated with the war, but based on the information that we have at this point in time, we do believe that inflation has now peaked and is on the way down here in Ireland.

“We do believe that this downward trajectory with inflation will continue and will actually accelerate, particularly in quarter two and quarter three of this year, so that is good news.”

McGrath added that the government is still “in the stage of implementing Budget 2023,” as inflation remains above 8%.

Several measures announced in the budget are due to expire at the end of February, such as the Temporary Business Energy Support Scheme and a lower 9% VAT rate on hospitality and domestic electricity and gas.

The government will make a “considered judgment closer to the time” on which measures could be extended, McGrath said.

Last month a study from the Economic and Social Research Institute (ESRI) forecast core inflation this year to be almost as high 2022 but found that Ireland would be unlikely to enter a recession.

The study also estimated that last year’s Gross National Product grew by 11.1%, while this year’s growth will be only 1.7%. 

McGrath continued: “We’re seeing some reductions at the forecourts, for example in terms of fuel, but in general we’re not seeing actual reductions, but we’re seeing an easing in the rate of increase.”

On the possibility of further interest rate increases from the European Central Bank, the minister said the ECB is facing a “difficult balancing act” between tackling inflation and not hurting consumers.

“The reality is inflation is insidious, it does hurt people, it hurts businesses, and it impacts negatively on economies and reduces the purchasing power that people have for the euro in their pocket, and that is a concern.”

“So it is in all of our interest that we do get inflation down, today’s figures are a welcome step in the right direction, but there is still a long way to go to get it fully under control.”

With reporting from PA