Reductions in prices are not yet being passed on to consumers as inflation falls, Minister for Finance Michael McGrath has said, calling for prices to be cut to relieve pressure on businesses and households.
Mr McGrath spoke on the sidelines of a meeting of the Eurogroup club of finance ministers in Brussels, after new data from Ireland’s Consumer Price Index (CPI) showed inflation continuing to slow in a trend that began this winter.
“We are seeing the overall level of inflation fall, which I very much welcome, but that needs to translate now into reduced price levels that are being charged to consumers because prices are still too high,” Mr McGrath said.
“We have seen dramatic reductions now in wholesale energy prices, but we’re not yet really seeing any significant pass through to the retail level to both households and businesses, so that’s a key issue in Ireland.”
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The CPI basket of consumer goods measured by the Central Statistics Office rose 6.1 per cent between June 2022 and June 2023, according to data released on Thursday, driven by increases in housing, water, electricity, gas and other fuels, and higher prices in recreation and culture.
The new figures showed inflation was continuing to slow, as when they were measured in May prices were 6.6 per cent higher than a year previously, though it remains well above the European Central Bank’s target rate of 2 per cent.
“Inflation is falling, which is good, but the real life experience of many individuals and families is that they remain under pressure,” Mr McGrath said. “We’re not yet really seeing any significant pass through to the retail level.”
At the Eurogroup meeting, the finance ministers agreed that there should be a “determined” tightening of spending policy to keep national balance sheets healthy and avoid contributing to further inflation.
“We are now at a turning point for our public finances after several years of expansionary policy,” Eurogroup president and Minister for Public Expenditure Paschal Donohoe told reporters after the meeting.
“We agreed a restrictive stance in the euro area is necessary for 2024.”
The European Commissioner for the economy, Paolo Gentiloni, said member states were “strongly” recommended to end subsidies that had been put in place to help consumers with high energy costs.
“It is very important to continue to work to bring down inflation. At the end of the day, inflation is a hidden tax that above all hits the middle class, the self-employed, families, and we have to bring it down without of course going back to the kind of austerity that we left behind in recent years.”
The Government has agreed that spending should grow by 6.1 per cent in the 2024 budget, due to be unveiled in October.
“We think it strikes the right balance between providing enough supports for households and businesses for Irish society, while at the same time not adding unnecessarily to the inflationary pressures that are already there,” Mr McGrath told reporters.
