Inflation across the euro area rose to 8.6% in June, according to an initial estimate by the EU’s statistical agency Eurostat.
Its estimate for inflation in Ireland was 9.6%, which is higher than many forecasters had predicted.
The Central Statistics Office will publish detailed inflation figures later this month.
Looking at the components of the flash HICP in Ireland for June 2022, energy is estimated to be up 6.2% in the month and up 54% since June of last year.
Energy also remains the biggest contributory factor to euro zone inflation with energy prices estimated to have risen on an annual basis by 41.9%. This compares to an annual rate of 39.1% in May.
Electric Ireland today announced it will increase residential gas bills by 29.2% and residential electricity bills by 10.9% from next month.
Food prices are estimated to have risen by 8.9%, up from 7.5% in May.
When food and energy prices are stripped out, core inflation is estimated to have risen by 3.7%.
Eurostat’s figures are based on the Harmonised Index of Consumer Prices (HICP) which allows for rates of inflation to be compared across European economies.
Over the past six months, the HICP has either matched the official measure of inflation in Ireland known as the Consumer Price Index (CPI) or fluctuated by upwards of a half a percentage point above the CPI.
The HICP differs from the CPI in how housing costs and some insurance services are measured.
Today’s figures firm the case for rapid European Central Bank rate hikes starting this month.
The euro zone inflation reading was higher than expectations for 8.4% and was driven mainly by energy prices even as food and services also made a marked contribution.
Inflation has risen steadily for more than a year now, initially fuelled by post-pandemic supply shocks and now by energy prices on the fallout of Russia’s war on Ukraine.
At more than four times the ECB’s 2% target, inflation is so high it is at risk of getting stuck at uncomfortable levels as businesses and workers adjust their pricing and wage behaviours to the new reality.
Even if volatile food and fuel prices are filtered out, “core” inflation remained well above the ECB’s target, distressing reading for policymakers as it suggests perpetuating price growth via so-called second round effects.
June inflation would have been even higher, analysts say, if Germany did not introduce temporary relief measures on fuel and transport, supporting arguments that further price pressure are still in the pipeline.
Adding to inflation pressures, unemployment fell to a record low 6.6% in May and with apparent labour shortages crippling parts of the services sector, jobs growth could persist, pressuring wages and ultimately inflation.
With a new “inflation regime” threatening longer term price stability, central banks around the world are now tightening policy quickly, even at the cost of slowing or even crashing growth.
Lagging its peers for many months, the ECB will also start raising rates this month, initially by 25 basis points, but today’s data strengthens the case for a bigger, 50 basis point move in September.
Rates will then continue to rise, though policymakers disagree on just how much more will be needed as growth slows and threats of gas supply cuts raise the prospect of a recession.
Markets price in a combined 143 basis points of rate hikes by the end of the year, indicating that increases are expected at every policy meeting over the rest of the year, with several of these in excess of 25 basis points.
At -0.5%, the ECB’s deposit rate has been in negative territory since 2014.
In a release to coincide with Eurostat’s ‘flash’ estimate of inflation, the CSO has noted that energy prices in Ireland rose by 6.2% in June and by 54% on an annual basis.
This compares to a monthly increase in energy prices across the euro area of 3.3% and an annual increase of 41.9%.
The CSO, which prepares the statistics published by Eurostat, also noted that eight out of the 19 countries in the euro area had annual inflation rates less than Ireland’s estimate of 9.6% while there were ten countries with higher annual rates.
The lowest inflation in the euro area was in Malta at 6.1% while Estonia had the highest at 22%.
Additional reporting by Reuters