"The worst inflation fever may be about to drop"

Commodity prices such as oil and wheat have come down significantly since the peak in March.

Raw materials for food have fallen for five months in a row, according to the UN agency FAO's latest Food Price Index.

The price of oil is trending down, for the third month in a row.

On Friday, the price of petrol fell to its lowest level since the beginning of February.  

It eases inflationary pressure.

At the same time, some of the bottlenecks in the transport of goods that remained after the pandemic shutdowns have begun to ease so that supply has caught up with demand.

It also eases inflationary pressure.

"Continued interest rate increases imminent"  

However, electricity prices are still extremely high here in Europe due to the high gas price on the continent and this is pushing inflation to historically high levels.

Eurostat estimates that inflation in the euro area was 9.1 percent in August.  

That forces central banks to continue raising interest rates, which need to be sharp, at least initially, to reverse market psychology so that we don't get caught up in high inflation expectations and believe that rising prices are here to stay.  

High interest rates reduce the demand for goods and services, it becomes more expensive to finance investments and we have less in our wallets to shop for, which slows down the economy and leads to recession.

This in turn leads to lower inflation.

Is the idea anyway.

"The patient under constant observation"

How it plays out in reality is another matter in such a messy situation we find ourselves in right now with uncertainty about the development of the war and question marks about how much more Putin can think of to cut gas sales to Europe.  

So the worst of the inflationary fever may be about to subside, but energy prices are still at a dangerously high level.

The question is whether the EU's energy ministers can succeed in removing the gas from the electricity price when they make their rounds in Brussels next weekend.

For now, the patient remains under constant observation. 

In any case, what we consumers should be observant about is that we don't start thinking that "everything is getting more expensive", because then it becomes a self-fulfilling prophecy and prices can continue to rise unjustifiably much without us protesting.