Inflation across the OECD bloc of industrialised countries slowed marginally in January on the back of falling energy prices.
The headline rate fell from 9.4 per cent in December to 9.2 per cent in January. Inflation has been falling since hitting 10.8 per cent in October but the rate of decline has slowed amid concern prices could prove stickier than initially anticipated.
The Organisation for Economic Co-operation and Development (OECD) said declines in inflation were recorded in half of the OECD countries in January compared with two-thirds the previous month, while noting that the highest inflation rates were recorded in Hungary, Latvia, Lithuania and Turkey (all remaining above 20 per cent).
The Paris-based agency said that after the peak observed in June 2022, energy inflation continued to fall in the OECD, albeit at a slower pace than the previous month. It reached 16.4 per cent in January 2023, its lowest level since March 2021, down from 18.2 per cent in December 2022.
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The fall in energy inflation stemmed partly from shifting policy in the Netherlands (introduction of a price cap on energy) and Italy (decrease of regulated energy products prices), it said.
In Belgium, Denmark, Italy and Turkey, the deceleration in energy prices in January 2023 was largely explained by the strong increase in the consumer price index for energy on the previous January, in other words base effects.
Food inflation in the OECD declined to 15.2 per cent, from 15.6 per cent in December 2022, while inflation excluding food and energy was stable.
In the euro area, year-on-year inflation as measured by the Harmonised Index of Consumer Prices (HICP) fell to 8.7 per cent in January 2023, from 9.2 per cent in December 2022. In Ireland, consumer prices rose by 7.8 per cent in January, according to the Central Statistics Office. Energy inflation continued to fall, while food inflation as well as inflation excluding food and energy both increased slightly.
The OECD noted Eurostat’s flash estimate for February 2023 pointed to a further decrease in year-on-year inflation – it fell to 8.5 per cent – in the euro area, with energy inflation falling significantly while inflation excluding food and energy slightly increased.
European Central Bank (ECB) chief economist Philip Lane said this week that Frankfurt will continue to raise interest rates beyond March in a bid to control inflation.
The “exact calibration” beyond March will depend on the ECB’s new economic forecasts, which come out next week, and on incoming data, he said.
