The Irish Times view on the cost of living crisis: some hope that the worst may be over

It would be wrong to suggest that the cost of living crisis is over. One in five Irish people is struggling and almost two thirds are in the same financial position now as they were at the height of the crisis early last year, according to a recent survey. But we might, at least, allow some optimism that the worst is behind us.

Earlier this week flash estimates from the Central Statistics Office put the rate of inflation at 1.6 per cent last month, the lowest point in three years. The easing of inflation across the euro zone is likely to lead the European Central Bank to lower its key interest rates in June, following 10 hikes since 2022. Two or three further rate cuts are possible this year with over 100,000 people on tracker mortgages benefitting immediately and the downward trajectory likely to feed into lower fixed and variable rates in time.

Bankinter, the Spanish financial institution with a presence here under the Avant brand, is set to compete more actively for Irish business, with clear benefits for borrowers and, in time, savers, while a new private health insurance provider is entering the market, which should exert downward pressure on prices.

The cost of electricity on wholesale markets is now over 70 per cent less than in the immediate aftermath of Russia’s all-out invasion of Ukraine. The full impact of that price decline hasn’t yet made its way down to consumers, but households are still paying around 25 per cent less for energy than this time last year and can look forward to more price cuts as 2024 progresses.

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The supermarket price spiral has also eased, with figures from retail analysts Kantar Worldpanel putting the rate at which grocery prices are climbing at 2.9 per cent, compared to 13 per cent in 2023.

But while there are reasons to be hopeful, we have endured a string of crises that have taken their toll and the latest Sign of the Times survey from Ipsos B&A, published last weekend, makes it clear that we are not out of the woods yet. Just 12 per cent of respondents told researchers they had more money now than last year, while 60 per cent have less. Some 62 per cent are “getting by” with one in five “struggling”.

The research also pointed to an underlying fragility to the nascent recovery with most people believing the global economic situation will worsen over the next 12 months and only one in 10 of the view that things will improve.

It remains to be seen if such pessimism is warranted but few people would bet against more bumps along the road. And while inflation has fallen, the actual level of prices in many cases has not, or at least remains well above pre-Covid levels. History teaches us that the full impact of an economic crisis takes time to wash through. But after a couple of years of upheaval there is, at least for now, a feeling of cautious stability.