Mr. Sebastian Barnes:

Whatever money you put into the economy will, in some ways, contribute to higher inflation. That is the constraint. The difficulty and underlying problem here is that we import energy and food which, as everyone recognises, are things we essentially have to have. That is particularly true of energy. The difficulty is that the people who gain from increases in prices are not, by and large, people in Ireland but people in other countries that sell us oil and gas. There is therefore a net loss to the economy and that has to be paid for in some way. We cannot fully compensate everyone for these higher prices because there is a net loss to the economy. That is really where this constraint with regard to higher inflation comes from. To be clear, we are not suggesting the really textbook approach of not providing any help and just letting it ride. We are not saying that. We are saying that there is a legitimate case both to help the more vulnerable households and to smooth this shock, which is very big. People are going to find very big bills landing on their doorsteps during the winter. There is a balance to be struck in managing compensation and managing inflation. Targeting improves that trade-off. It means that more help can be provided to those who need it most while causing the same amount of inflation than if measures were not targeted. The balance is much better but that does not change the fact that putting more money into the economy adds to inflationary pressures.