Headline inflation in the Irish economy moderated to 3.3 per cent in June as global tensions eased and energy prices dropped.
However, the latest barometer of price growth comes as European Central Bank (ECB) chief economist Philip Lane warned about knock-on effects from higher energy prices that might take a while to show up.
“The second-round effect is probably going to take some time,” Lane told Bloomberg Television’s Francine Lacqua.
The fear is that higher energy prices will drive food and other prices higher in the coming months, heaping further pressure on households here.
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Lane also said the ECB would not box itself in on the trajectory of monetary policy, suggesting it was still open to another interest rate hike.
The latest Harmonised Index of Consumer Prices (HICP) indicated that prices rose at an annualised rate of 3.3 per cent in June, down from a rate of 3.5 per cent in May and an annual increase of 3.2 per cent in the HICP for the euro area for the same period.
The Central Statistics Office (CSO) said energy prices were estimated to have decreased by 1.9 per cent in June but to have risen by 10 per cent over the 12 months to June.
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The latest estimate of price growth comes at a pivotal moment for the global economy, with peace efforts between the US and Iran still ongoing amid sporadic tit-for-tat attacks.
Iran’s effective closure of the Strait of Hormuz earlier in the year halted global shipments of oil and gas through the channel, triggering a sudden surge in energy prices.
The CSO said food prices were estimated to have gone down by 0.3 per cent in June but were up by 0.7 per cent on an annual basis.
The effect of higher energy prices on food costs is still a major concern.
Excluding energy and unprocessed food, the underlying HICP for June is estimated to have grown by 2.6 per cent in annual terms.
Eurostat will publish a flash estimate of inflation for the euro zone for June on Wednesday.
Inflation slowed more than expected across most major euro zone economies in June, preliminary data showed on Tuesday, easing pressure on the ECB policymakers to raise interest rates in the near term.
Germany, France and Italy all reported softer-than-expected readings, while Spain was the only large economy where inflation did not ease. The figures increase the likelihood that overall euro zone inflation, due on Wednesday, could undershoot expectations.
Economists have forecast the bloc’s inflation at 3 per cent for June.
“Upside risks to inflation have declined markedly,” said Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics. While expectations remain elevated and energy prices could rise again, “there is no pressing need for the ECB to raise interest rates further”, he said.
Additional reporting by Reuters
