Irish inflation eases back to 1.7% as cheaper fuel and lower airfares reduce costs

Headline inflation in the Irish economy eased back to 1.7 per cent in May as transport costs linked to cheaper fuel and airfares fell. This was down from an annual increase of 2.2 per cent in the 12 months to April.

The latest Consumer Price Index (CPI), the State’s official measure of inflation, come as inflation across the euro zone continued to slow (it fell to 1.6 per cent in May) and as EU and US negotiators continue talks to avoid the imposition of higher US tariffs on EU exports.

Prices – on a monthly basis – remained unchanged in May having risen by 0.4 per cent the previous month.

The most significant increases in the 12 months to May were seen in food and non-alcoholic beverages, which rose 4 per cent.

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The Central Statistics Office (CSO), which collated the data, said the annual change in food costs “reflects a rise in prices across a range of products”.

[ Euro-zone inflation slows below 2%, strengthening case for ECB cut this weekOpens in new window ]

The cost of housing, water, electricity, gas and other fuels was up 2 per cent year on year primarily because of the increased rents, which rose by over 5 per cent.

Transport costs, however, fell by 2.4 per cent when compared with May 2024.

“Transport decreased primarily due to lower prices for airfares, petrol and diesel,” the CSO said.

Petrol and diesel prices were down 6.6 per cent and 5.1 per cent respectively in tandem with falling oil prices internationally.

The underlying inflation rate, which excludes energy and unprocessed food, was 1.9 per cent in the 12 months to May.

ECB president Christine Lagarde signalled last week that the bank was coming to the end of lowering interest rates, after recently cutting its key deposit rate by a quarter of a percentage point to 2 per cent.

There is increased speculation that the ECB will pause its cycle of rate cuts in July amid the uncertainty posed by US trade policy.

While headline inflation across the bloc is slowing, the euro zone could hit by a tariff-induced shock if US president Donald Trump’s threat to impose 50 per cent tariffs on imports from the EU materialises.

“Victory laps are always nice, but there is always another battle,” ECB president Lagarde told reporters when asked of the bank was prepared to finally call victory in the war against inflation after its eighth rate cut in 12 months.