Higher EU inflation 'biggest' monetary risk for Ireland

Interest rate hikes could eat into disposable income and dampen consumption

European Central Bank is due to meet next week to discuss interest rates in the wake of the energy price shock caused by the war in Iran. 

The “biggest monetary risk” facing Ireland is not high inflation at home but rather high inflation across the rest of the eurozone, which could force the European Central Bank (ECB) to raise interest rates, eroding household disposable income and “dampen consumption”, KPMG has warned.

This comes amid the ongoing conflict in the Middle East which has severely impacted oil and gas markets, and which has already led to higher levels of inflation. Eurozone annual inflation was 2.6% in March, while inflation in Ireland was higher at 3.6%.