The October inflation figures showed general improvement everywhere (see first graph). In Ireland the year on year increase in the CPI dropped to 5.1% from 6.4% in September. In terms of the Eurostat measure, which excludes mortgage interest, the rate of inflation in Ireland was 3.6%, also well down on September. But it is still quite a bit above the rate for the Eurozone which is now down to 2.9%. In the US the rate was 3.2%.

In Ireland the big influence was the decline in gas and energy prices to the householders (see second graph). As reported in the CPI, these two items are now in negative territory after major increases earlier in the year. Mortgage interest, as a factor in the CPI, though still increasing, is doing so at a slower rate. As of October this item was 41.6% higher year to year compared with 49.5% in September. The net effect of these items can be seen in the third graph where there is a steep fall in the rate of inflation in the ‘housing’ segment of the CPI, which includes energy and mortgage interest.

The main influence on declining inflation in Europe seems to be the impact of successive rises in the ECB interest rates on economic activity. There were ten such increases in these up to November when the ECB decided not to make any change. With sluggish growth now in prospect for the EU there was speculation that maybe a cut was on the way. But the latest indications are that inflation is still too high for the ECB to consider any immediate prospect of reducing its interest rate.

In the US the situation is also balanced. But that is between inflation not yet at the target and economic activity which is maybe a bit tooo robust. The era of rate reductions has not yet started on that side of the Atlantic.

With the approach of winter, attention turns to the situation in the commodity markets for gas and oil. The latest data shows an upward trend in gas and oil prices. Obviously with two wars in progress and a tightly balanced market in gas sustained increases are always possible.