Energy Crisis Easing: Slow Growth in Energy Prices Observed

The European Union ended the year with some relief as price growth moderated, but the cost of living remained high

by Faruk Imamovic
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Energy Crisis Easing: Slow Growth in Energy Prices Observed

The European Union ended the year with some relief as price growth moderated, but the cost of living remained high. The consumer price index for the 19 countries that use the euro rose in December by 9.2 percent compared to a year earlier, which is the slowest pace since August, the statistical agency of the European Union, Eurostat, announced.

It was the second consecutive drop in inflation since June 2021. In November, the rate fell to 10.1 percent, while in the previous month it was a record 10.6 percent, the Beta agency reports, citing AP. Households and businesses across Europe have been burdened by rising energy prices since February, when Russia began its war in Ukraine that has threatened oil and natural gas markets and been a major driver of inflation.

"It is likely that the peak in inflation is behind us now, but far more relevant for the economy and policymakers is whether inflation will structurally trend back to two percent from here on," said Bert Colijn, senior eurozone economist at the ING bank.

Slow Growth in Energy Prices

It seems that the energy crisis may be easing, based on the latest data. Energy prices have seen a slower growth rate of 25.7 percent year-on-year, compared to November's 34.9 percent and October's 41.5 percent.

Natural gas prices have also decreased from their record highs last summer, as the EU has stocked up on gas from other countries in preparation for the winter. The mild winter weather has also reduced concerns about shortages during the heating season.

While food prices, which are a major contributor to inflation in Europe, have remained relatively stable, prices for food, alcoholic beverages, and tobacco have increased at a rate of 13.8 percent in December, slightly higher than the previous month.

"We are raising interest rates and we will raise them further, at a steady pace, until they are at a level which ensures a timely return of inflation to our two-percent medium-term target," Lagarde said in a message on December 23.

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