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Ireland’s inflation rate dropped to 2.8% in December from 3.2% in November thanks to more favourable base effects. These helped to bring inflation down despite strong month-on-month price gains of 0.5%. Easing food, airfares and fuel inflation also all contributed significantly to the drop. Looking ahead, we expect inflation in Ireland to continue to ease a little further across 2026 but stay above 2.5% in the near-term because of persistent strong domestic demand and infrastructure shortages.
December’s Ireland inflation data confirms November peak
Reflecting our assessment last month that November’s data would be the peak, Ireland’s inflation rate fell to 2.8% in December from 3.2% in November.
Looking at the details, food price inflation dropped to 4.1% in December from 4.3% the month before. This should help households feel a little less under pressure, although food inflation remains elevated. Furthermore, evidence suggests food inflation has an outsized impact on inflation expectations. Lower food inflation therefore reduces the risk of any knock-on effects from employees bargaining for bigger pay rises.
What’s more, transport inflation fell sharply to 0.2% in November from 2.6% in December because volatile airfares inflation registered -4.8% from -0.7% previously. Fuel inflation also helped, slowing to 1.2% from 2.8%, as more favourable base effects helped drag down energy inflation.
All told, December’s fall in inflation means we’re confident the recent rise in inflation has run its course.
Ireland’s 2026 inflation outlook: pressures more persistent
Looking ahead, we think inflation will ease slightly over the course of 2026. However, we’re less convinced about the pace of that easing than we were previously. That’s for a few reasons.
First, strong domestic demand, which is being bolstered by another big increase in government spending. A tight labour market and potential infrastructure shortages, particularly in housing, will also put upwards pressure on domestically generated inflation. Indeed, we expect services inflation to average over 3% this year.
Second, auto-enrolment and a 4.8% rise in the National Minimum Wage will keep inflationary pressures in sectors such as hospitality persistent as firms grapple with increased costs. The good news is that pension contributions will be phased in gradually, giving employers time to adjust.
All told, we think today’s drop in inflation confirms that November was the peak for the recent rise, but that inflation is likely to stay above 2.5% over the coming months. Indeed, with the European Central Bank far more concerned with Europe’s larger economies, we think the government will have to show more spending restraint if inflation is to fall back quicker than we currently expect.
