Inflation and interest rates in Ireland, explained

Last reviewed October 23, 2026

What is inflation?

Inflation is the rise in the prices of everyday things over time. The Central Statistics Office measures it with the Consumer Price Index (CPI) and the EU-wide HICP.

If prices rise faster than your pay or your savings, you’re getting poorer without noticing.

Try it: what inflation does to your moneyMove the sliders to change the inflation rate and the number of years.

Inflation a year3%

Years10

€100 kept as cash would buy

€74

of today’s shopping

Something costing €100 today

€134

in 10 years

At 3% a year, prices double about every 23 years.

Why the ECB changes rates

As Ireland uses the euro, interest rates are set by the European Central Bank in Frankfurt for the whole euro area, not by the Central Bank of Ireland.

When inflation is too high, the ECB raises its rates. Borrowing costs more, people spend less, and price rises slow.
When the economy is weak, it cuts them to encourage borrowing and spending.

What it means for you

What you have	When ECB rates rise
Savings account	Usually pays more, though often slowly and not all of it
Tracker mortgage	Your rate goes up by the same amount as the ECB’s rate
Variable-rate mortgage	Usually goes up: your lender decides how much
Fixed-rate mortgage	No change until the fixed period ends
New mortgage or loan	Costs more to take out

A tracker rate is the ECB’s main rate plus a fixed margin. Trackers haven’t been offered on new mortgages for many years, so only older loans have them.

When a fixed period ends, you’re usually moved to a variable rate. Compare your lender’s new fixed rates, and other lenders, before it does: switching mortgage can save thousands. Our mortgage switching calculator shows how much.

Beating inflation

What matters is your real return: what your money earns after inflation and DIRT. Savings paying 3% when inflation is 2% grow by very little once DIRT is taken.

Keep your emergency fund in a good demand account or State Savings.
For goals more than five years away, investing, including your pension, has historically beaten inflation by more. See investing basics.

Frequently asked questions

Who sets interest rates in Ireland?

The European Central Bank, for the whole euro area. The Central Bank of Ireland doesn’t set rates, but it supervises Irish lenders and sets the mortgage rules.

What is a tracker mortgage?

A mortgage whose rate is the ECB’s main rate plus a fixed margin. When the ECB changes its rate, your rate changes by the same amount.

What is the ECB’s inflation target?

2% a year, over the medium term, across the euro area. Ireland’s own inflation can be higher or lower than the euro area average.

How does inflation affect my savings?

If prices rise faster than your savings grow, your money buys less. In Ireland, look at the rate after DIRT of 33%: 3% interest is worth about 2%, so with 2% inflation your savings barely grow in real terms.

Should I fix my mortgage rate?

A fixed rate gives you certainty: your payments don’t change for the fixed period, even if the ECB raises rates. A variable rate can fall if rates fall, but can also rise. Check any charge for leaving a fixed rate early before you switch.