Inflation: “The focus should be more on Moscow’s responsibility”

“Inflation in the goods and commodities market has become a reality long before the events of this year.” The world has been led to this situation by years of irresponsible macroeconomic policies of the G7 countries. (…). The governments of the major Western economies simply accelerated the use of money printing. »

This analysis of the economic situation is now widely used in Europe. However, Vladimir Putin said these words on June 17 at the International Economic Forum in St. Petersburg.

Definition by “Money Board” It seems irrelevant, especially since the Western countries that have used it the most (that is, the ones that have proportionally increased the size of their central bank balance sheets the most) are Japan and Switzerland. These two countries also have the lowest inflation rates.

“before the events of the year”

On the other hand, Vladimir Putin’s remark regarding the start date of the inflation increase can be maintained. Indeed, it was in the euro area before that “Events of the Year” : Harmonized Index of Consumer Prices (HICP) calculated by Eurostat. [l’office européen des statistiques] In October 2021, it crossed the 4% threshold there. And, precisely, Vladimir Putin’s Russia is no stranger to this phenomenon.

On August 24, 2021, six months before the invasion of Ukraine, the financial news site CNBC headlined “Russia Delivers Much Less Gas to Europe – And We Don’t Know Why.” Now we know. And it should be noted that the “energy” component of the HICP index in September 2021 broke the historical record dating back to 2008, driving more than 17% before reaching 45% in March 2022.

For European manufacturers, whose production costs are measured by the industrial producer price index (PPI), the “energy” component reached more than 100% growth in March 2022, even before economic sanctions on Russia take effect.

True, current inflation in the Eurozone is not limited to the energy sector: in August 2022, the HICP index excluding energy reached 5.7%. But the energy shock, of course, affects all products, all services that are consumed in the Eurozone. The maximum correlation between energy index and non-energy index evolution appears after five months (“determination coefficient” 0.93).