Homeowners have been warned to take shelter for months from painful price increases and soaring energy costs that could persist into next year.
Although inflation trended to Celtic tiger-era highs of more than 5%, the government said it would not adjust the budget package.
A combination of increases in energy bills, including the one reported by SSE Airtricity yesterday, has pushed up annual household costs by up to €500.
Tanisti Leo Varadkar said he expects inflation to peak and fall again sometime next year.
But at the European level, some analysts believe It will take the entirety of 2022 to solve the set of bottlenecks and supply chain issues.
this means Energy costs are expected to rise with pressure on food and other commodity prices due to fuel prices and other overheads.
However, Varadkar said there would be « no substantive departure from the budget package » despite rising inflation.
We don’t want to change that. We need to reorganize the public finances for next year.
“We only intend to borrow to invest in new homes, new hospitals, new schools, broadband and things like that. In fact, borrowing money at a time when interest rates are about to go up in order to do other things would not be a good long-term strategy.”
Speaking at the opening of a new food production center in Ballybay, Co Monaghan, he said inflation was « inevitable » given the energy crisis and central banks around the world printing money.
“What we expect, but we are not sure of, is that inflation will peak and fall sometime next year because it is largely driven by two factors. The first is basically the energy crisis, which is an international crisis in origin. Central banks around the world have printed About nine trillion euros between zero percent interest rates and quantitative easing. There’s a lot of money being printed all over the world, and when you print a lot of money, the prices of things you can’t print go up, and there’s a certain imperative about that. »
SSE Airtricity announced its third price increase this year, adding €300 to customers’ annual electricity bills and €200 for gas, according to price comparison website bonkers.ie.
The European Union’s statistics agency, Eurostat, said yesterday that Ireland could see inflation of 5.1 per cent in October, compared to October 2020, after a rise of 3.8 per cent in September.
This is well above the 4.1 percent average for the 19-nation eurozone. The last time Irish prices rose beyond 5% was in April 2002. Eurostat said energy prices are behind the headline figure, up 23% this month. This has an indirect impact on the cost of transportation, which, combined with the shortage of shipping containers around the world and increased post-Covid demand, is driving up consumer prices.
Food prices have stabilized so far, although the latest consumer price index showed a 4.4% rise in the cost of bread, which some economists have warned could be a sign of things to come.
However, Economist Hazel Ahern Flynn, of IPIC, said the higher prices come on the back of last year’s decline.
This is expected to start declining in the medium term. But she said it was a bit unpredictable.
The European Central Bank this week maintained its forecast that inflation will start to decline again next year and said it would keep ultra-low interest rates in place, advising markets to be « patient ». But Varadkar said the country should prepare for higher interest rates in the future – which would make borrowing more expensive for the government.
« What you’ll see, I think, next year, is that central banks are starting to back off (printing money) and not in Europe, but certainly in other parts of the world interest rates are starting to go up, » he said. .
« Because while inflation can be brought under control, the euro at very low interest rates, for both individuals, businesses and governments, may be coming to an end and we need to prepare for that as well. »
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