Ireland could face further increases in food and consumer prices later this year as higher energy costs work their way through the economy, according to the latest Quarterly Economic Commentary from the Economic and Social Research Institute (ESRI).
The institute said there is typically a delay of about nine months between rises in fuel and food costs and their impact on consumer prices, suggesting households may experience higher grocery bills during the autumn and winter months.
The ESRI has revised its inflation forecasts upward, predicting inflation of 3.7% in 2026 and 3.1% in 2027. While the outlook for economic growth remains positive, the institute warned that elevated fossil fuel prices and uncertainty surrounding tensions in the Middle East continue to pose risks.
Report author Professor Conor O’Toole said stronger-than-expected investment activity had prompted an upgrade to growth forecasts. Modified Domestic Demand, a key measure of domestic economic performance, is now expected to grow by 2.6% in 2026.
The increase is linked to stronger housing construction and rising investment in technology infrastructure, particularly projects associated with artificial intelligence and data centres.
Despite the stronger growth outlook, the ESRI warned that rising energy prices are likely to feed into broader inflation over the coming months. The institute said lower- and middle-income households could require support if costs continue to rise, but stressed that any measures should be temporary and carefully targeted.
The report also criticised the fuel support package introduced following protests earlier this year, describing it as poorly targeted and disappointing in structure. According to the ESRI, strong public finances combined with political pressure created conditions that led to less effective policy decisions.
Professor Alan Barrett said similar pressures could emerge during upcoming public sector pay negotiations and urged policymakers to remain mindful of vulnerabilities in the public finances.
Speaking in the Dáil, Tánaiste and Minister for Finance Simon Harris said there would be “no cliff edge” when current fuel excise reductions expire at the end of July. He said a decision on whether to extend the measures would be made in the coming days, noting that oil prices had recently fallen and the Strait of Hormuz remained open to shipping traffic.
The report also examined housing and employment trends. The ESRI increased its forecast for housing completions to 38,500 in 2026 and 40,500 in 2027. However, it warned that weak planning permission figures continue to threaten longer-term housing targets and could lead to a growing housing deficit.
On the labour market, the institute expects unemployment to remain low but highlighted potential challenges posed by artificial intelligence. Researchers said some jobs may be displaced by new technologies, although AI is also expected to create new opportunities and support economic growth.
The ESRI said continued monitoring of AI’s impact on workers and targeted support measures would be important as the technology becomes more widely adopted across the economy.
