Euro area – “supply chain effect” on inflation diminishes

While the inflation rate for services has probably trended slightly upwards due to the sharp rise in wage costs, the inflation rate for goods has fallen until recently. The main reason for the latter is that the supply bottlenecks have eased and the price-increasing effect of higher energy prices has also weakened noticeably. However, the trend of producer prices in recent months suggests that this effect is gradually coming to an end and that the lowest point in the inflation rate for goods is not far off, especially as wage costs are also rising significantly for goods producers. This suggests that the core inflation rate will stabilize well above the ECB's 2% target in the coming months.