Soaring Energy Costs and Severe Weather Threaten Irish Food Prices

The European Central Bank (ECB) is likely to raise interest rates again in October due to high inflation levels, which are almost entirely driven by energy costs. The annual increase in prices in Ireland stood at 3.9% in September, with energy inflation being the fastest rising component at 15.3%. Unprocessed food saw prices only 1% higher than a year ago.

The ECB's target level is currently above the current inflation levels. Economists are becoming increasingly concerned about the outlook for food prices. The Economic and Social Research Institute (ESRI) flagged the risks in its quarterly economic commentary, citing weather effects as a major factor.

The ESRI notes that food inflation remains low in Ireland but warns of higher prices due to energy costs and weather events. A severe drought experienced in much of Europe over the summer, coupled with the strong or very strong El Niño event expected over the coming months, means that Europe is possibly only in the middle of a series of weather events which will feed into food prices.

The ESRI cites research from the Bank of England showing that the impact from severe weather on food prices is meaningful but comes with a lag of 12 months. This means that a drought in the summer of 2026 will be seen in food prices in mid-2027.