Higher energy prices drive Irish inflation to 3.4%

Higher energy prices drove Irish inflation to 3.4 per cent in August, the highest level in three months.The latest Harmonised Index of Consumer Prices (HICP) indicated that energy prices increased by 4.3 per cent between July and August as ongoing uncertainty over the US-Iran conflict continued to keep oil prices high.The latest readout comes ahead of inflation numbers for the euro zone as a whole, which are expected to indicate prices in August were at least 3 per cent higher than a year ago.Some expect an even sharper rise in inflation.READ MOREWith European inflation sitting above the European Central Bank’s (ECB) 2 per cent target level, markets are expecting the bank to announce another interest rate hike in September.ECB policymakers are ready to raise interest rates at ‌their next meeting in September to contain the side effects of the ​Iran war but they have little ​appetite to signal further tightening after that, according to Reuters. The latest Irish HICP indicated that food prices fell by 0.2 per cent last month and have gone up by 0.1 per cent in the last 12 months. Service prices remain unchanged in the month and have risen by 3.7 per cent in the 12 months to August, the Central Statistics Office (CSO) said.Inflation as measured by the HICP, which is different from the CSO’s official barometer of inflation – the CPI (consumer price index) – had fallen to almost zero at the end of 2024 on the back of falling energy prices.But US’s ill-fated attack on Iran has triggered a second energy price shock, aggravating cost-of-living pressures in Western countries.“With ‌European ​inflation dynamics coming through this week, that probability may be massaged around the edges,” Chris Weston, head of research at Pepperstone Group, said in a note. “We turn the page ⁠on month-end and head into a data-dependent, central ​bank-focused September. With multiple central banks potentially tightening policy ... ​Treasury yields testing important levels and geopolitical risk remaining elevated, there is plenty for traders to navigate.”Germany’s policy-sensitive two-year government ‌bond yield hit its highest level since July 2024, ​taking cues from US Treasuries after Federal Reserve chair Kevin Warsh on Friday signalled interest rates may need ⁠to rise.The Irish HICP figure will feed into wider inflation numbers for the euro zone as a whole due out on Tuesday. – Additional reporting by Reuters