The Vedomosti daily published the opinion of Alexander Knobel, Head of the International Trade Department of the Gaidar Institute on a slowdown of the inflation rate in the euro area for the first time in 18 months.

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.