Conflict in Gulf sending energy costs up, with predictions of more food price increases
Consumers have been told pressure on household budgets will continue for two more years after the inflation rate shot up.
It was back to 3.7pc last month, the joint-highest it has reached since the start of 2024.
Diesel, home-heating oil, rents, mortgage repayments and third-level fees have all risen this year. The conflict in the Gulf is sending energy costs up.
Experts at tax and consulting firm RSM Ireland warned that it could be 2028 before the inflation rate falls back if high energy prices persist.
The Central Statistics Office (CSO) said prices rose by 3.7pc in the year to August. This is up from an annual increase of 3.4pc in the 12 months to July.
Experts said this was a considerable pick-up in price rises and would add to pressure on the Government to deliver some financial respite to households in October’s budget.
Food price rises were up only slightly in the month, but grocery cost increases up to now continue to put a strain on household finances. Food inflation is expected to pick up strongly this autumn.
Central Bank governor Gabriel Makhlouf and ESRI recently warned that second-round effects from the Gulf conflict would lead to prices increasing strongly in the coming months, particularly for food.
RSM Ireland chief economist Thomas Pugh said the 3.7pc last month had been driven entirely by rising fuel and heating-oil prices on the back of renewed tensions in Iran.
He said inflation was likely to edge up again later this year as utility bills rose and higher energy costs worked their way through supply chains.
Mr Pugh said the relief in food inflation would probably prove temporary.
“We expect food, core goods and airfares inflation to gain momentum as higher energy costs work their way through supply chains,” he said, adding that there was a risk inflation would head over 4pc in the coming months.
“There’s now enough inflation working its way through supply chains that we see little chance of it returning to target until 2028 if current energy prices persist,” he said.
The August inflation figures were compiled before some recent announcements of electricity and gas price rises were made.
Bord Gáis Energy and Electric Ireland, which have about two million residential customers between them, are among seven energy firms to announce price rises so far this year.
VHI Healthcare and Laya Healthcare are to follow up premium rates increases earlier this year with more next month.
Diesel prices have topped €2 a litre, with the cost of home-heating oil up by €550 for 1,000 litres since last year.
CSO statistician Anthony Dawson said that last month the national average price for a litre of diesel was €1.95, an increase of 25c on August 2025. Petrol prices increased by 15c to €1.87 a litre.
Pump prices have risen since then, with diesel now over €2 a litre.