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Economy in Brief

Declines in Commodity Prices Leading to Lower Inflation Rates Worldwide
by Louise Curley November 10, 2008

Inflation is beginning to take a back seat in the deliberations of Central Bankers. The financial crisis, rising unemployment and declining production are overshadowing inflation fears at the same time that these fears are lessening. No matter the actual level of inflation, incoming data are showing that inflation rates are declining worldwide.

Today Egypt, Greece, Latvia and the Czech Republic reported their Consumer Price Indexes for October. The inflation rate as measured by the year-to-year increase in the CPI has recently been declining at varying degrees of speed in each country. Egypt, with inflation over 20%, has seen its inflation rate decline in the last two months from 23.8% in August to 20.1% in October. Another high inflation rate country, Latvia, has experienced declines in its inflation rate in the last five months, from 17.7% in June to 13.8% in October. Greece and the Czech Republic with relatively low inflation rates have nevertheless also witnessed declines in their inflation rates. Inflation in Greece has come down to 3.9% in October from 4.8% in June, and to 6.0% from 6.7%, respectively, in the Czech republic. The "core" inflation rate in the Czech Republic has declined to 1.65 % in October from 2.64 % in June. Inflation rates for the four countries are shown in the first chart.

Dramatic declines in commodity prices over the past year are responsible for much of the improved inflation outlook worldwide. The second chart shows the prices of wheat, copper and oil over the past year.

INFLATION RATES  Oct 08 Sep   08  Aug 08  Jul  08  Jun 08 
Czech Republic: Total 6.0 6.6 6.5 6.9 6.7
Czech Republic: Core 1.65 2.54 2.54 2.64 2.64
Greece: Total 3.90 4.58 4.68 4.83 4.89
Egypt: Total 20.13 21.52 23.79 22.15 20.22
Latvia: Total 13.73 14.88 15.72 16.61 17.74
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