Inflation performance is related to many forces in an economy. In a comparison of three Latin American countries two weeks ago, we saw that stable inflation seems not only to foster steadier growth, but stronger growth. Today, in a mix of reports of generally slower inflation in three types of economies, other factors look to interact with consumer prices in impacting the well-being of the nations' citizens.

Several European countries are experiencing low and, even, negative inflation. The CPI in Sweden was actually down in February from a year ago, and as seen in the first graph, the 12-month rate has been lower than in the US persistently since early 1996. Cheaper clothing and housing costs are key contributors to the improvement in Swedish inflation. The strengthening Euro seems to be restraining prices in the Netherlands, as seen in the second graph [note that Euro's scale is inverted there to show the direction of the exchange rate effect on domestic prices]. The Netherlands' CPI pace has come down in an orderly progression in the last few years, apparently as a lagged response to the upturn in the Euro. This effect is not uniform, however, with the Spanish CPI moving at a moderate but irregular pace; the higher euro has perhaps just managed to prevent further price acceleration in Spain.

The transition economy in this group, Hungary, is apparently struggling somewhat with its inflation. Unlike most other countries, the CPI has picked up recently compared with last year and the year before. Housing costs, health care and education are the main sources of the higher total CPI. All these categories are "administered" to some degree and may exhibit political considerations as well as market supply/demand relationships.

Finally among today's reports for February, Pakistan has seen a 4.3% advance in its CPI in the last year. This is somewhat an improvement from January and December, but extends a longer trend toward firmer inflation. In this unsettled country, costs of such basic items as food and housing are accelerating, making daily life more tedious for Pakistanis.