The Planning Office expects inflation to average out at 3.2 per cent this year, according to the latest forecasts. This is significantly higher than the forecasts made in March (of 2.6 per cent average inflation) and in February (of 1.9 per cent inflation). The reason is the war in the Middle East, which has made energy significantly more expensive.
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Spiralling energy costs are driving up inflation: second index-related top-up expected to be triggered this year
Colin Clapson
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The office expects the threshold for a price index-related top-up to be exceeded twice this year: in July and in December. When the trigger index is exceeded, social benefits and public sector wages go up 2 per cent three months later, to compensate for the rise in the cost of living. The impact on wages in the private sector varies depending on the sector.
The triggering of an index top-up in July had already been forecast in March. At that time, it was assumed that the following top-up would be triggered in August 2027. Now that will happen in December, more than six months earlier than anticipated.
Next index top-up based on the money index
For the next top-up, the money index will be applied for the first time. This means that wages will still rise in line with the cost of living, but not at the same rate for everyone.
A ceiling has been set at €4,000 for pre-tax monthly wages and €2,000 pre-tax for benefits and pensions. Anything above these amounts will not be indexed. Below the ceiling, automatic indexation will continue as normal.
The money index is set to be applied twice: once this year and once in 2028. The next index top-up will operate using the money index.
The money index will be applied twice: once this year and once in 2028.