Irish inflation climbs to 6.3% in August as mortgage interest rates soar

Inflation in the Irish economy rose to 6.3 per cent in August, driven by a more than 50 per cent jump in mortgage interest repayment rates in the last 12 months.

The increase in the consumer price index (CPI), the official measure of inflation in the Republic, is up from an annual rise of 5.8 per cent recorded in July.

Publishing the CPI figures for August, the Central Statistics Office (CSO) noted this was the 23rd straight month where the annual increase had been at least 5 per cent.

The largest price increases in the 12 months to August 2023 were for housing, water, electricity, gas and other fuels, which saw an overall increase of 17.3 per cent.

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The CSO said the “significant” rise in this category was primarily due to a rise in the cost of mortgage interest repayments, which have increased by 51.3 per cent in the 12 months to August 2023.

With central banks battling to put a lid on inflation, Irish mortgage rates hit their highest level in a decade in recent weeks, as lenders are passing a stream of European Central Bank rate hikes on to customers.

The rise was also influenced by annual increases in electricity and gas prices, which have risen by 25.1 per cent and 36.6 per cent respectively in the past 12 months.

The latest data showed a 12.9 per cent rise in recreation and culture costs in the 12 months to August, driven by a 57.9 per cent rise in prices for package holidays, and a 13 per cent increase in pet-related products and services.

Education and transport were the only categories where prices fell in the year to August.

Education costs decreased by 6.3 per cent, driven by a reduction in third-level costs, while transport prices were down 2 per cent, primarily due to lower prices for fuel, services in respect of personal transport equipment, and passenger transport by bus and coach.

On a monthly basis, consumer prices rose by 0.7 per cent between July and August. This compared with a monthly increase of 0.2 per cent in August 2022.

The largest price increases in the month were for clothing and footwear (+4.2 per cent) and for housing, water, electricity, gas and other fuels (+1.7 per cent).

The only categories that saw prices fall in the last month were with recreation and culture (-0.8 per cent) and communications (-0.1 per cent).

A breakdown showed the cost of an 800g sliced pan of bread has increased by 4 cent in the past year. The price of a two-litre carton of full-fat milk has risen by 11 cent in the last year, while the average price of Irish cheddar per kilogram rose by 63 cent and butter per pound rose by 19 cent.

The cost of 500g of spaghetti has risen by 16 cent in a year, while a 2.5kg bag of potatoes costs 11 cent more.

Siptu deputy general secretary Gerry McCormack said rising prices would place “significant stress and anxiety” on workers and families already struggling with the cost-of-living crisis.