Rising rents drive Irish inflation to 0.7% in December

The rising cost of housing kept Irish inflation in positive territory last month. The latest Consumer Price Index shows that prices nationally rose by 0.7 per cent in the 12 months to December, marginally higher than the previous month.

The main driver was an increase in the cost of housing, water, electricity, gas and other fuels, which rose by 4.6 per cent in annual terms. This was mainly due to higher rents, which were 6.4 per cent higher.

The cost of alcohol and tobacco products also rose, by 2.8 per cent, as did restaurant and hotel prices, which were 2.1 per cent higher.

In contrast, the price of household furnishings and equipment fell by 3.5 per cent. The figures also show the average cost of motor insurance also fell, by 7 per cent year-on-year.

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However, Jonathan Hehir, managing director of car insurance website insuremycars.ie claimed motorists were unlikely to be feeling the benefits of this price reduction.

“There are a number of reasons for this. The Government, the courts, insurers and those in the legal profession all need to work together to tackle fraud and address the high award pay-outs that are still putting upward pressure on premiums,” he said.

Nonetheless he said there was heightened competition in the marketplace driven by brokers encouraging people to switch for lower prices.

Inflationary pressure in the Irish economy has remained weak for several years on foot of lower oil prices internationally.

A slower rise in the price of oil saw euro zone inflation fall to an eight-month low of 1.6 per cent in December.

The unexpected fall brings inflation below the European Central Bank (ECB) target of a rate below but close to 2 per cent complicating plans for a possible hike in interest rates.

The ECB ended its €2.6 trillion crisis-era asset purchase scheme last month, but has said it will keep interest rates at record lows at least through the summer to support the economy and inflation.

ECB policymaker François Villeroy de Galhau said this week there was no rush to detail further steps towards normalisation than those the ECB has already outlined, which also include plans to gradually reduce its stock of assets after the first rate hike.