Despite a decline in energy costs, headline inflation in Ireland’s economy unexpectedly experienced an uptick in May, rising from 1.6% to 1.9%, as per the most recent preliminary estimate for the harmonised index of consumer prices (HICP) by the Central Statistics Office (CSO). Prices in May exhibited a monthly rise of 0.5%, stimulated by transport expenses, including air tickets, increasing by 1.5% for the month and 7.1% for the year.
Even with falling energy prices, headline price growth saw a rise. As per CSO estimates, energy prices decreased by 0.3% in May and by 3.6% over the course of a year until May.
These numbers from Ireland will contribute to the broader inflation data from the eurozone, due for release on Friday.
The forthcoming eurozone data for May will have a bearing on the next interest rate decision by the European Central Bank (ECB), anticipated in early June. Policymakers in Frankfurt are likely to slash interest rates next month, marking a change following 10 consecutive rate increases since July 2022. Later in the year, if headline inflation continues to decrease, more interest rate cuts are projected.
The HICP is applied for cross-country comparison within the eurozone, but the official measure for Irish inflation is the consumer price index (CPI), which in April indicated the headline rate of inflation in Ireland to be 2.6%.
The gauge also suggested that food prices remained constant on a monthly basis but rose annually by 2.3%.
The CSO has estimated the underlying inflation, which omits the erratic energy and food costs, to have increased by 2.5% since May 2023.