Inflation Reaccelerates Slightly Everywhere

The inflation figures for October showed a slight uptick everywhere. In Ireland the HICP, the measure used by the EU, increased from 0.0% in the year to September to 0.1% in October. That still leaves Ireland with the lowest inflation rate in the EU. Services, specifically the hospitality business, was the main cause of the slight acceleration. In terms of the standard CSO Consumer Price Index, inflation was 0.7% in the year to October, unchanged from September.

In the Eurozone inflation was 2.0% slightly up from 1.7% in September and still in line with the ECB’s target of 2%. It seems unlikely that this slight increase, due to services inflation, will prevent the ECB from cutting rates at its next meeting. Besides, the Eurozone economy is virtually stagnant and in need of some kind of stimulus.

In the U.S. the inflation rate in October went up from 2.4% to 2.6%. Given that the U.S. economy is expanding rapidly a reduction in interest rates is not so obviously needed. However there is a view that the slight acceleration in inflation is an aberration and that at the next opportunity the Fed will continue its series of interest cuts .

Oil and gas are critically important commodities and major influences on prices. Despite the conflict in Ukraine and the threats coming from the Middle East, prices (Brent Oil and Dutch TTF Futures) have been fairly steady in the year to October. However, since the end of October gas futures have risen sharply. With the geopolitical situation very stressed and winter approaching, sustained increases are always possible.