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Firmer evidence of easing price pressures

Data over the past month have brought the clearest signs yet that inflation is starting to ease. Our estimate of world CPI inflation fell for the first time in 15 months in October, from 7.9% to 7.7%. Of course, that is still a very high rate, but there are various indications that inflation will fall much further. Timely data from the euro-zone revealed that inflation there finally declined in November. Crude oil prices have continued to decrease and while European natural gas prices have risen slightly, they are still far lower than they were in the summer. Product shortages have continued to ease and surveys have revealed a further improvement in suppliers’ delivery times and reduced backlogs of work. There is also some evidence that labour shortages are abating, with job vacancy rates generally falling. While inflation will remain high for some time, a marked downward trend should help to take the pressure off central banks next year.

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