Economics

Inflation figures for December show that for the third month running inflation has increased on both sides of the Atlantic, including Ireland. In Ireland the rate in December was 1.4% having been half that in October. It should be noted, however, that by international standards that is quite low. In the US the December rate is now 2.9% and in the EU, 2.4%, both figures outside the monetary target. It seems unlikely that that will stop the ECB from lowering interest rates in the Eurozone: the case for a cut in he US, where the economy is booming, is not so clear cut. In Ireland, the increase in inflation is mostly attributable to services prices, mostly the hospitality sector, where prices increased by 2.7% in December. These are relatively disappointing results for the US and Europe and will likely mean that any further cuts in interest rates will be slow coming in the US given that the economy there is doing well. In the Eurozone early interest rate reductions are more likely given the sluggish performance of the EU economy, though some conservatives think that inflation is not yet subdued and the ECB should hold its hand for the time being. The December preliminary figures will reinforce this line of thinking.