ALEXANDER KNOBEL: “INFLATION IN EUROPE IN SHORT-TERM WILL DEPEND ON THE ENERGY MARKET SITUATION”

According to Eurostat’s preliminary data, the rate of inflation in the euro area slowed down to 10% in November after a record-high 10.7% in October. This was the first slowdown of price rises since June 2021. By the end of 2021, the rate of inflation amounted to 5% accelerating constantly on average by 0.5 p.p. a month fr om June till December. The inflation momentum became more dramatic after anti-Russian sanctions were introduced and prices for energy commodities appreciated. In March 2022, the inflation rate was equal to 7.4% after 5.9% in February.

According to Alexander Knobel, the current momentum is measured more precisely by month-on-month inflation, rather than year-on-year growth in prices. By Eurostat’s estimates, the consumer price index reflecting the share of inflation fell by 0.1% in November on October owing mainly to a 1.9% depreciation of prices for energy commodities. In November, all other goods and services (except for energy commodities) in the euro area appreciated by 0.2%, much below the rates of price increases in October (0.8% a month).

The inflation rate is returning to the normal levels of 2%-3% a year on the back of the following two key factors: an increase in the interest rate by the European Central Bank and the European economy’s sliding into recession, Alexander Knobel believes. But the inflation momentum in Europe in short-term will depend mainly on the energy market situation, Alexander Knobel notes. A similar situation with inflation is observed in the US wh ere it can return to normal in the next few months, Alexander Knobel says.