Belgium's headline inflation rate has fallen to close to zero percent, as declining food and energy costs continue to ease price pressures throughout the economy.
According to a report published on Monday by Statbel, Belgium's official statistics office, year-on-year inflation dropped to just 0.36% in October, down from 2.39% in September. This is the lowest rate since January 2021.
Statbel attributed the decline mostly to falling food and, especially, energy costs. Food inflation decreased from 11.15% to 8.98%, while energy inflation – which has been negative since February – fell from -28.73% to -37.15%.
Core inflation, which strips out energy and volatile food prices, also decreased but remains elevated, dropping from 6.95% to 6.55%. Core inflation has fallen steadily since peaking at 8.70% in May.
Except for a brief uptick in March, Belgium's annual headline rate has also declined steadily since peaking at 12.27% in October last year.
Shortly after the report's publication, Prime Minister Alexander De Croo took to X (formerly Twitter) to suggest that the financial support measures introduced by his government during the Covid-19 pandemic and subsequent energy crisis had been vindicated.
Notre économie est robuste malgré les difficultés traversées.
Les choix posés lors des crises portent désormais leurs fruits. Notre croissance économique est forte et se poursuit. Les prix reviennent à la normale. Nos familles, nos entrepreneurs peuvent construire sereinement. https://t.co/z2Iu5UwIiI — Alexander De Croo 🇧🇪🇪🇺 (@alexanderdecroo) October 30, 2023
"Our economy is robust despite the difficulties we have encountered," De Croo wrote. "The choices made during the crises are now bearing fruit. Our economic growth is strong and continues. Prices are returning to normal. Our families, our entrepreneurs can build with peace of mind."
A statistical artefact?
According to Associate Professor of Economics at Ghent University Stijn Baert, however, the decrease in Belgium's annual headline rate is largely a consequence of the fact that current prices are being compared with last year's peak.
"The fact that the inflation rate (the comparison with a year ago) is at a low point has everything to do with the historically high inflation of October 2022," Baert wrote on social media.
Baert added that, according to alternative price metrics, inflation in Belgium remains extremely high – and, indeed, is actually increasing.
In particular, he noted that month-on-month inflation rose by 0.3% from September to October. He also stressed that current prices are up 12.7% compared to two years ago. "This is the increase you would normally expect after more than six years," he wrote.
Baert further warned that Belgium's current inflation rate might actually be too low, adding that it is well beneath the European Central Bank's (ECB) 2% target.
"An inflation rate of 0.4% is very low," he wrote. "If it continues in the coming months, which we do not expect, it is even too low. The ECB is aiming for a 'small' 2%."
'Massive worries on the horizon'
Although the full October inflation data for the rest of the eurozone has not yet been released, Belgium's rate is almost certain to be among the lowest in the currency union.
Average inflation in the eurozone was 4.3% in September: a 0.9 percentage point decline since August but still more than twice the ECB's target rate.
At its last meeting on Thursday, the ECB left its key interest rates unchanged for the first time in 15 months. The ECB had increased rates at its previous ten meetings.
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In an interview with The Financial Times published on Saturday, ECB President Christine Lagarde claimed that she "should have been bolder" and raised rates more rapidly following Russia's full-scale invasion of Ukraine in February last year.
She also suggested that the current crisis in the Middle-East could lead to further price hikes – and, hence, additional ECB rate increases – over the next few months.
"The kind of supply shock that could possibly hit us, depending on how the situation evolves in the Middle East and how Iran is brought into this and what is the global reaction – these are huge question marks and massive worries on the horizon," she said.
