Inf lation creeps up again ‘but the overall trend is downward’

INFLATION crept up again last month to 4.6% – rising from 3.9% in November, new figures have revealed.

However, the long-term trend is one of steady decline towards the European Central Bank’s (ECB) 2% target.

Economist Austin Hughes said the increase was not a ‘cause for alarm’ and he does not expect the ECB to raise interest rates further.

The bank has issued a series of interest rate hikes in a bid to stem runaway inflation, and those increases have knock-on effects for thousands of mortgage holders. However, Mr Hughes remains of the view that the ECB will start to cut rates by late summer.

Luckily for families, energy prices are falling sharply – but they are still above pre-pandemic levels in 2019.

Electricity prices were down more than 15% last year and gas prices dropped by almost 13%. Mr Hughes said: ‘The trend is still downward.

‘When you look at the details, the encouraging thing is food prices are flat for the month and energy prices are falling both on the month and the year. The big drivers of the surge in inflation are now moving in the right direction.’

Inflation has been felt in every sector, with package holidays up 46% over the year and 11% in December alone, while air travel is up 23%. Energy prices were up by an average of 5.1% last year compared to a rise of 41.2% in 2022, the Central Statistics Office (CSO) reported.

The price of goods increased by 3.2% on average compared to a rise of 9% in 2022. The price of services, which includes mortgage interest, went up by 8.7% compared to a rise of 6.9% the previous year. Raising interest rates to cool inflation sent mortgage repayments soaring by almost 37%, which homeowners will have noticed in their monthly repayments.

CSO statistician Anthony Dawson said: ‘The most significant growth in the 12 months to December 2023 were seen in recreation and culture, up 10.3%, and restaurants and hotels, up 6.6%.’