Inflation rate shoots up to 3.7pc mainly due to energy cost rises due to Gulf conflict

Pressure on household budgets continues to ramp up with new figures showing a higher level of inflation August than in previous months this year.

The Central Statistics Office (CSO) said prices rose by 3.7pc between August last and August this year.

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 will add to pressure on the Government to delivery some financial respite for households in next month’s Budget.

Pushing up the inflation rate were higher third-level fees due to the decision to cut the student contribution fee by €500 in contrast to the cut of €1,000 last year.

Higher-heating oil is another factor pushing up the rate of inflation.

The cost of home-heating oil up by €550 for a 1,000 litres since last year, according to price comparison site oilprices.ie.

Electricity costs are also up, and diesel and petrol prices also contributed to the rise in the consumer price index, our official measure of inflation.

Tracker mortgage costs rose after June’s European Central Bank rate hike.

Conflict in the Gulf has seen the CSO record higher prices for airfares and car hire

Food price rises were only up slightly in the month, but grocery cost increases up to now continue to put a strain on household spending.

Central Bank Governor Gabriel Makhlouf and the ESRI recently warned that second-round effects from the Gulf Conflict will see prices increasing strongly in the coming months, particularly for food.

This month’s inflation figures were compiled before some of the announcements of electricity and gas price rises were made.

Bord Gáis Energy and Electric Ireland, who have around two million residential customers between them, are among seven energy firms to announce price rises so far this year.

And 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 a 1,000 litres since last year.

Public transport fares are due to rise in the new year.

CSO statistician Anthony Dawson said in August the national average price for a litre of diesel in August 2026 was €1.95, an increase of 25c on the same month last year.

Petrol prices increased by 15c to €1.87 a litre.

Pump prices have risen since then,

Overall consumer prices rose by 0.7pc in the month between July  and August, the CSO said.

Clothing and footwear prices were up as were transport costs in the month.

The rise in clothing and footwear prices was due to a recovery from sales. Transport prices rose mainly due to higher costs for petrol and diesel, as well as higher costs for car hire, the statisticians said.

Consumers will take some solace from the fact that there were some reductions in the cost of food in the month, after sustained rises over the last year.

Mr Dawson said: “There were price decreases in the 12 months to August 2026 for Irish cheddar per kg (-67c), a pound of butter (-55c), sirloin steak per kg (-12c), 2 litres of full fat milk (-9c), a 2.5kg bag of potatoes (-7c) and an 800g loaf of brown or white sliced pan (both -2c).”