Irish inflation drops to 0.7% in September amid steep reduction in energy prices

Headline annual inflation in the Irish economy dropped to 0.7 per cent in September, its lowest level in more than three years, as the cost of energy on international markets continued to fall.
Last month was the first since March 2021 in which the consumer price index (CPI), the State’s official measure of inflation, has been below 1 per cent on an annual basis.
The latest figures from the Central Statistics Office (CSO) indicate household electricity prices have fallen 19.6 per cent in the 12 months to the end of September while gas prices, including natural gas for the purposes of home heating and energy, have fallen 19.1 per cent over the same period.
Core or underlying inflation, which strips out typically volatile food and energy prices, slipped to 2.4 per cent on an annual basis from 2.9 per cent in August.
Inflation in the Republic is now mostly concentrated in the restaurants and hotels sector, where prices were up 3.9 per cent on the year in September. Alcohol and tobacco prices, meanwhile, registered the second largest annual increase, up 3.1 per cent from September 2023.
The largest declines on the year were in clothing and footwear, down 7.5 per cent, and in housing, water and energy prices, which were down 2.6 per cent overall.
Within the housing and energy category, steep declines in retail fuel and electricity prices – a consequence of cheaper wholesale prices on global energy markets – were somewhat offset by an 11.3 per cent annual increase in mortgage interest payment costs. Mortgage rates have risen sharply over the past two years as banks and other retail lenders passed on higher European Central Bank rates to customers.
Private rents jumped 4.4 per cent in the 12 months to the end of September while local authority rents were up 7 per cent over the same period.
At the end of last month the CSO said headline inflation in the Irish economy fell to a three-year low of just 0.2 per cent in September. That was according to the latest flash estimate for the EU’s harmonised index of consumer prices (HICP), which looks at a different basket of data.
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That figure was down from 1.1 per cent the previous month and was below the euro area average of 2.2 per cent. The CSO noted the 0.2 per cent rate of price growth was the lowest level of HICP inflation recorded since March 2021.
Meanwhile, fresh data on Thursday showed headline annual US inflation slipping to its lowest level in September since February 2021, with prices up 2.4 per cent over the 12 months to the end of last month.
While core inflation in the world’s largest economy was slightly higher than expected, it is unlikely to deter US Federal Reserve policymakers from announcing another 0.25 per cent interest rate cut when they meet early next month.
“With a labour market that on the surface looks resilient, and cracks in the US economy looking few and far between, a small acceleration in the core inflation rate is unlikely to encourage the Fed to slam the breaks on rate cuts,” said Isaac Stell, analyst at investment service Wealth Club.
“The Fed looks like they’re in pole position for the moment, but will be wary of any complacency creeping in. The road ahead remains long and the Fed doesn’t need to take the fast lane for now.”