Pace of consumer price inflation cools to 2.2%

The annual pace of inflation has also cooled dramatically from 6.1% recorded in June last year compared to the same month in 2022: Larry Cummins 

The annual pace of inflation slowed again in June to nearly a three-year low, according to figures from the Central Statistics Office (CSO).

Consumer price inflation rose by 2.2% last month, down from 2.6% in the 12 months to May, as prices continue to stabilise following a period of high interest rates to drive down sticky inflation.

The annual pace of inflation has also cooled dramatically from 6.1% recorded in June last year compared to the same month in 2022.

The figures showed the decline in June marked the eighth consecutive month where the inflation rate was lower than 5%.

The pace of prices eased annually for food and non-alcoholic beverages, alcoholic beverages and tobacco, housing and utilities, transportation, communications, recreation and culture, and restaurant and hotels. Costs also fell further for clothing and footwear.

There was double digit inflation recorded for certain staple food items such as potatoes and olive oil which were 18% and 24% pricier in the 12 months.

The sectors with the largest annual increases were in transport at a pace of 4.9%, but this is down from 6.7% in May, and restaurants and hotels at 4.4% which declined from 4.7%.

However, prices crept up in so called “miscellaneous” goods and services businesses. This increase was mainly driven by higher health and motor insurance premiums and an rise in prices for hairdressing salons. This increase was partially offset by lower prices for jewellery and watches.

Insurance costs

The rate of inflation in areas like motor and home insurance, where prices rose 8.2% and 7.4% respectively “is a concern”, said Paul Walsh, spokesman for Peopl Insurance.

“The rise in the cost of car repairs and consequently damage claims, is one of the things likely to be pushing up motor insurance premiums. If the cost of damage claims continues to go up, so too will the rate that motor insurance premiums will increase by,” he said.

Excluding energy and unprocessed food, the consumer price inflation went up by 3.1%.

In monthly terms, consumer prices ticked upward slightly by 0.4%, after a 0.5% increase in May.

The sectors with the largest growth in the month were recreation and culture, up 2.5% and transport, rising 0.8%.

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Policymakers are keenly watching inflation across the eurozone as the European Central Bank prepares to meet again next week to discuss its interest rate reduction roadmap.

Markets have priced in at least one more interest rate cut before the end of the year, however it remains uncertain if the ECB will cut rates again in July before it breaks for the summer in August.

Wage growth across the eurozone has caused some concern, for the ECB, notably chief economist Philip Lane, ahead of its next meeting.