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Natural gas, electricity prices likely to increase further in Europe

Oil&Gas Materials 17 September 2021 18:11 (UTC +04:00)

BAKU, Azerbaijan, Sept.17

By Leman Zeynalova - Trend:

The recent surge in European gas and coal prices will push headline inflation further above central bank’s targets in most countries in the coming months, Trend reports with reference to the UK-based Capital Economics research and consulting company.

“European coal and natural gas prices have surged over the past month to levels not seen in more than a decade. The rise in prices will push up inflation. In general, the relationship between changes in gas prices and consumer prices is not strong in most countries. The correlation is negative in Hungary and less than 0.5 in Poland, Czechia, and Turkey with up to a year lag. This reflects the fact that prices are set by regulators,” said the company.

Capital Economics notes that while prices may not be passed through straight away, there will be an impact.

“The head of Poland’s energy regulator URE this week approved a 7.4 percent gas tariff hike for households from October. We estimate this would add 0.1percent-pts to inflation over the next twelve months and push it to 6 percent y/y in December. Further increases of natural gas and electricity prices are likely. One country of concern is Romania. The gas market has recently been liberalised, resulting in a 15.6 percent m/m rise in gas prices in July. Prices are now determined on the competitive market and this week the government said it was looking at ways to protect households. With inflation above target and the leu under pressure, all the signs point to interest rate hikes coming earlier than we currently forecast.”

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Follow the author on Twitter: @Lyaman_Zeyn

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