Finance | Addressing inflation
To ask the Minister for Finance the extent to which efforts continue to be made to address inflation; the extent of the results to date; and if he will make a statement on the matter.
Consumer price (HICP) inflation picked up sharply over the past year, with annual average inflation of just over 8 per cent recorded in 2022, compared with around ½ per cent over the past decade. Every advanced economy is in the same position, with the euro area inflation averaging 8.4 per cent last year.
While inflation remained elevated at 8.2 per cent in December, this marked a decline from the peak of 9.6 per cent reached last summer, and 9.4 as recently as October. This faster than anticipated easing of the inflation rate is explained largely by movements in wholesale energy prices, with wholesale oil and gas prices declining in recent months. This easing in wholesale energy markets suggests that inflation has now peaked and is on a downward trajectory. That said, the inflation rate is expected to remain high over the coming months, with a more pronounced easing of the inflation rate anticipated from the second quarter of this year as ‘base effects’ drop out of the annual rate. However, due to continued energy supply concerns there remains significant uncertainty around the outlook.
The Government is acutely aware of the impact of rising prices on households and firms. That is why Budget 2023 focused on mitigating inflationary pressures. Budget 2023 includes an overall package of €6.9 billion, including adjustments to income tax bands and increases in social welfare and pension rates. Complementing this is a set of one-off measures amounting to €4.1 billion, including three €200 electricity credits to each household, an additional social welfare payment, a double payment of child benefit, the extension of the reduction in excise duties and the VAT rate on gas and electricity to end-February and the Temporary Business Energy Support Scheme. This approach balances the need to provide necessary fiscal support to households and firms while avoiding a situation in which the Government’s response becomes part of the inflation problem.
Looking ahead, my Department will continue to monitor inflationary developments and will publish updated inflation projections in the Stability Programme Update in April. No decision has been made on whether the measures currently in place will be allowed to expire or whether new measures will be introduced. It would be premature to make a decision on further interventions before the prospects for inflation, developments in the public finances and the effectiveness of current measures can be fully evaluated.
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