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Inflation cools across EU as states reduce dependence on Russian gas

After peaking in the double-digits this past fall, inflation has declined steadily across the EU.

(CN) — Inflation rates continued to cool across the European Union in March with countries using the euro as currency reporting lower price hikes than other member states, according to data published by Eurostat on Wednesday.

As a whole inflation averaged 8.3% across the EU in March, down from 9.9% in February. The 20-state euro area reported inflation of 6.9% in March, down from 8.5% in February.

Inflation in both the EU and the euro area measured near equal in March 2022. Since peaking in the double digits this past October, euro-using countries reported steeper drops in inflation than the EU when averaged as a whole.

Three eurozone countries reported the lowest inflation rates in the EU last month: Luxembourg, 2.9%, followed by Spain, 3.1%, and the Netherlands, 4.5%.

Hungary, which uses the forint, reported the EU’s highest inflation at 25.6%. Lativa, which uses the euro, reported inflation of 17.2%. Czechia, which uses the koruna, saw 16.5% inflation.

The highest inflation rates were attributed to food, alcohol, and tobacco, the costs of which were up by three points. Energy costs dropped 0.05% as the continent continued to make energy cuts to lessen dependence on Russian fuel.

The EU's Winter Economic forecast predicted inflation would drop from 9.2% to 6.4% over the rest of the year and settle below 3% by 2024.

Over the last seven months, EU member states cut natural gas consumption by 17.7% according to data published by Eurostat on Wednesday.

Anticipating the possibility of Russia cutting off energy exports to the EU, the Council Regulation recommended all member states reduce energy use by 15% last year. Twenty of the union’s 27 members succeeded in hitting the target 15% reduction in natural gas use.

Since August 2022, Finland sliced natural gas consumption by 55.7%. Lithuania and Sweden also reported decreases nearing 40%. Belgium and Slovenia fell just short of the 15% goal.

Malta, the smallest gas consumer in the EU, was the only member state to report an increase at 12.7%.

Prior to Russia's invasion of Ukraine, the EU imported more than a quarter of its crude oil from Russia, along with 46% of solid fuel and 40% of natural gas. The invasion in February 2022 led to a 30% cut in fuel exports, driving record inflation across the continent.

Energy only makes up about 10% of EU household spending, with about 40% going to services and 20% to food, alcohol and tobacco. While energy consumption decreased across the EU in 2020, rising prices are likely to offset any reported savings.

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