CONSUMER PRICES IN Ireland are estimated to have risen by 4.9% in the 12 months to August.

In its latest flash estimate for the Harmonized Index of Consumer Prices (HICP), the Central Statistics Offices reports that prices have increased by 0.5% since in the month since July.

The HICP is a “harmonised” measure of inflation that is comparable across all countries in the European Union because all the countries follow the same methodology.

The corresponding rates for the Eurozone will be published tomorrow.

Inflation

The annual rate of inflation in August compares to a figure of 4.6% in the 12 months to July, and to an annual increase of 5.3% in consumer prices for the Eurozone over the same period to July.

The CSO noted that by “looking at the components of the flash” estimate for August, it can estimate that energy prices have increased by 3.4% since July, and by 5.1% over the 12 months to August.

And while food prices have remained the same since July, they rose by 7.7% in the 12 months to August.

Excluding energy and unprocessed food, the HICP is estimated to have increased by 4.8% in the year to August.

The CSO noted that these are flash estimates which are subject to revision when the final HICP results are published next month.

Elsewhere, transport costs have been shown to have risen by 0.7% in the month to August, but have decreased by 1.5% in the year to August.

Interest rates

Dan O’Brien, chief economist of the Institute of International and European Affairs, described the 0.5% increase in consumer prices in the month from July to August as a “hefty” one.

He added that if a similar increase is seen across the entire Eurozone in the figures which will be published tomorrow, then it “would make another interest rate hike in September considerably more likely”.

Consumer prices in Ireland rose by a hefty half a percent between July and August, according to today's @CSOIreland numbers.
Data for the entire eurozone out tomorrow morning. A similar 0.5% increase would make another interest rate hike in September considerably more likely.

— Dan O'Brien (@danobrien20) August 30, 2023

In July, the European Central Bank increased interest rates by 0.25%.

This was the ninth consecutive increase in the space of a year and brough the ECB’s benchmark deposit rate to 3.75%, the highest it has been since May 2001.

In a statement when announcing the increase on 27 July, the ECB said the latest increase would ensure “that inflation returns to its 2% medium-term target in a timely manner”.

The ECB is due to have its next meeting on 14 September and its president Christine Lagarde said interest rates could go up again at this meeting.

Speaking on 30 July, she said: “I hear some people say that the final rate hike will take place in September.

“There could be a further hike of the policy rate or perhaps a pause. A pause, whenever it occurs, in September or later, would not necessarily be definitive.

“Inflation must return durably to its target.”