Bernard Durkan (Kildare North, Fine Gael)
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259. To ask the Minister for Finance the extent to which he remains satisfied that inflation here will continue to reduce further; and if he will make a statement on the matter. [3321/23]

Bernard Durkan (Kildare North, Fine Gael)
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260. To ask the Minister for Finance the extent to which the contributory factors to inflation continues to be monitored by his Department; and if he will make a statement on the matter. [3322/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 259 and 260 together.

Consumer price (HICP) inflation picked up sharply over the past year, with annual average inflation of just over 8 per cent recorded in 2022, compared with around ½ per cent over the past decade. Every advanced economy is in the same position, with euro area inflation averaging 8.4 per cent last year. The key drivers of global inflationary pressures over the past year were the rise in wholesale energy, food and other commodity prices as a result of the war in Ukraine.

While inflation remained elevated at 8.2 per cent in December, this marks a decline from the peak of 9.6 per cent reached last summer, and 9.4 as recently as October. This faster than anticipated easing of the inflation rate is explained largely by movements in wholesale energy prices. Following a surge in prices over the summer and early autumn, gas prices have moderated in recent months. This primarily reflects the milder winter, high European gas storage levels and sufficient LNG supplies with market prices now at around £1.70 per therm, compared with £4 per therm at Budget time. Oil prices have also declined due to the slowdown in global demand.

This easing in wholesale energy markets suggests that inflation has now peaked and is on a downward trajectory. That said, the inflation rate is expected to remain high over the coming months, with a more pronounced easing of the inflation rate anticipated from the second quarter of this year. Despite this, the price level consumers face will remain elevated. Furthermore, due to continued energy supply concerns there remains significant uncertainty around the outlook for inflation.

Government has acted forcibly and decisively to help ease the burden of inflation. Budget 2023 was a 'Cost of Living' Budget and includes an overall package of €6.9 billion, including adjustments to income tax bands, increases in social welfare and pension rates and reduced childcare costs. One-off measures amounting to €4.1 billion have also been provided. This was on top of some €3 billion in measures introduced by Government over the course of last year. The temporary and targeted nature of many of these supports balances the need to provide necessary fiscal support to households and firms while avoiding a situation in which the Government’s response becomes part of the inflation problem.

Looking ahead, my Department will continue to monitor incoming economic data and will publish updated inflation projections in the Stability Programme Update in April. No decision has been made on whether the measures currently in place will be allowed to expire or whether new measures will be introduced. It would be premature to make a decision on further interventions before the prospects for inflation, developments in the public finances and the effectiveness of current measures can be fully evaluated.