Monday 18 December 2017

Interest rate hikes possible on back of rising costs in Europe


Donal O'Donovan

IRELAND has the lowest rate of inflation in the European Union but fast-rising costs elsewhere means interest rate hikes are still a risk.

Annual inflation in Ireland rose to 1.3pc in September compared to 1pc in August, according to data from Eurostat, the European statistics agency.

Inflation across the EU is now running at 3.3pc. The euro area fared only slightly better with inflation running at 3pc. Inflation accelerated at its fastest pace in almost three years in September in Europe.

Rising energy costs are behind the trend. Rising inflation puts pressure on the European Central Bank (ECB) to keep interest rates higher even as the debt crisis and economic slowdown demand easier borrowing conditions.

Euro-area inflation -- the key measure when interest rates are set for Ireland -- rose sharply in September to 3pc from 2.5pc in August. It is the sharpest rise since October 2008.

Ireland has the slowest rate of inflation, helped by falling costs across a range of areas. In fast-growing Austria inflation is running at 4pc.

Across the EU, energy costs jumped 12.4pc in the period.

The ECB aims to keep annual consumer inflation below 2pc but has admitted it will average closer to 2.6pc this year.

Irish Independent

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