The inflation figures for September show a continued decline in the rate which has now been going on for about a year. In the case of Ireland the HICP measure of inflation used by Eurostat recorded a nil change in prices on the same time in 2023. No other Eurozone economy achieved that. In terms of the CSO’s conventional measure of inflation for Ireland, the rate was 0.7% increase on September 2023.
In the Eurozone inflation was 1.7% down from 2.2% in August and most notably below the ECB’s target of 2%. That facilitated a third 0.25% cut in interest rates by the ECB since June and brings the rate to 3.25%. There is a view in some quarters that inflation may resume somewhat in the months ahead. But much commentary now focuses on the very slow growth of the EU economy and the need for monetary stimulus. It may be that in December, when the ECB meets again and with growth concerns predominant, a 0.5% cut might be possible.
In the U.S. the inflation rate in September went down slightly by 0.1% from 2.5% to 2.4% while in the UK it remained at 2.6%.
In the US policy indications have swung radically from month to month. Back in the summer, the inflation situation was initially judged not to warrant a cut in official rates also given data on a high level of economic activity. Within days of that announcement job creation data proved disappointing and the stock market went into meltdown. It recovered quickly and a cut in interest rates seemed on the cards. But then came multiplying indicators of strong economic growth with the result that no change in interest rates seems to be warranted. However, markets seem to have taken the view that the economy is going to remain strong and that rates are likely to rise.
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 so far. Obviously with a stressed geopolitical global situation, and a tightly balanced market in gas, sustained increases are always possible. But up to now the markets are calm.
