The inflation rate for this year could be higher than previous estimates, according to the Tánaiste and Minister for Finance.
Simon Harris has told the Budgetary Oversight Committee that the latest assessment from his department is that inflation for 2026 could reach 3.75%.
This compares with an expected average of 3.3% outlined last month in the spring forecast.
At that time, the Department of Finance outlined three possible scenarios for inflation for the year.
Mr Harris told the Committee on Budgetary Oversight that while the most benign scenario envisaged headline inflation of 3.3%, "Under an adverse scenario involving a more prolonged period of elevated energy prices, inflation could average around 3.75% this year, and in a severe scenario, inflation could average around 4.5% this year, with year-end inflation significantly higher".
Minister Harris told the committee today that "while the situation remains fluid, my department's latest assessment is that we are currently operating closer to the adverse scenario.
"Though that assessment may evolve further depending on developments in the Middle East."
Mr Harris said that if it were not for the war on Iran, the Government would be revising upwards growth forecasts, rather than downward.
The current 3.75% inflation projection is almost 2% higher than the Department of Finance forecast from earlier this year, which was 1.8%.
However, the Minister for Finance also told the committee that "the central message is that the economy is expected to grow in all scenarios, but at a more moderate pace than we have seen in recent years and with higher inflation".
Latest figures from the Central Statistics Office from earlier this month show that consumer prices rose by 3.7% in the year to April - which is the highest annual inflation rate since the beginning of 2024.
The increase was largely driven by energy-price rises - including for home heating oil, which has surged in cost by more than 80% in the past year.
The inflation assessment was included in the Annual Progress Report 2026, on which Minister Harris and Minister for Public Expenditure Jack Chambers are updating the committee.
Fine Gael TD Joe Neville raised the IMF's concern over the relative weakness of Ireland's tax base compared to increasing expenditure.
Mr Harris welcomed the annual visit by the IMF, and questioned some media framing of that visit.
The visit is a reminder of some of the challenges and vulnerabilities the economy faces, he said, adding that the IMF is an important voice and good discussions were held.
Mr Chambers defended the Government's charting of a "sustainable fiscal path".
Mr Harris also said the "prize" is to create "structural changes", rather than frequent cost-of-living support measures, and that this is what the Government wants to achieve.
