February 16, 2011
By Staff Reporter
By Andrew Bushe
DUBLIN — Inflation increased again in November to an annualized rate of 7 percent, the highest since August 1984 and about three times the average in the Euro-zone countries, according to figures released last week by the Central Statistics Office.
Prices went up by 0.4 percent in the month as a result of rising housing, transportation and food prices, compared to a 0.7 percent increase in October.
The Government hopes the November jump from 6.8 percent in October will be the inflation peak for the year and that prices may start to moderate next month.
Prices have been increasing since inflation bottomed out at 1.2 percent in July 1999 and experts agree that it now represents the major threat to the economy.
The most notable price rises in November were a 4.2 percent increase in housing as a result of increased mortgage rates and higher rents, transportation up 0.4 percent, papers and magazines up 0.4 percent, and food up 0.3 percent.
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In his budget earlier this month, Finance Minister Charlie McCreevy forecast that inflation would fall to 4.5 percent next year and to 2.5 percent in 2003.
He estimated the inflation rate for the whole of this year would be 5.5 percent, compared to 1.6 percent in 1999.
The minister cut taxes and increased welfare benefits in the budget but also plans to cut the standard rate of value added tax (VAT) from 21 to 20 percent beginning Jan. 1 as an anti-inflation measure.
A wave industrial unrest has hit industry in recent weeks, particularly the public sector, as workers seek an increasing share of the Celtic Tiger prosperity.
A vital national pay deal, the Program for Prosperity and Fairness, is seen as fundamental to continuing economic success.
The projected 33-month-long deal was negotiated earlier this year on the basis of a projected inflation rate of 2.5-3 percent.
It was to deliver 15.75 percent in pay increases and 10 percent in tax cuts in three phases, with a 5.5 percent pay increase this year.
The rising inflation rate led to a renegotiation of the terms to give workers an extra 2 percent beginning next April and a 1 percent lump sum in April 2002.
McCreevy can’t use economic tools like currency changes or raising interest rates to combat inflation. As a Euro economy, Ireland is subject to monetary policy set by the European Central Bank.