The Minister for Finance has said he expects inflation to fall “much more rapidly than previously assumed.”
Speaking ahead of a speech to the Irish Tax Institute in Dublin, Minister Michael McGrath said the Department of Finance now believes inflation will average between 4% and 5% this year, with the annual rate falling to 4% in the final three quarters of the year.
At Budget time last year, the Department had forecast inflation would average just over 7.1% this year.
This significant downward revision is due to oil and gas prices falling steeply since forecasts in the Budget were published last September.
The minister said he welcomed the move by one utility company earlier this week to lower the prices they charge to domestic customers, and he hopes other companies will follow suit.
In his speech, the minister also said that “incoming data” suggests the global downturn “may not be as severe as previously assumed”.
He added that the Irish economy has proven to be “remarkably resilient.”
Mr McGrath said he expects the domestic economy “to effectively move sidewards” over the coming months before returning to growth in the second three months of this year.
He also referred to the National Reserve Fund, to which €6bn has now been transferred.
Work is ongoing over its future purpose, he said, but some of the options include making it “a more future-focused investment fund that would cater for changes in demographics in the years ahead, as well as protecting against fiscal shocks such as a sudden loss in corporate tax revenue.”