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Inflation and competitiveness divergences in the euro area countries
High energy and commodity prices and supply bottlenecks have driven strong inflation in the euro area and higher inflation differentials between euro area countries.[ 1 ] Cross-country inflation differentials, as measured by the inter-quartile range, rose from historically low levels in the pre-pandemic period to historical highs at the end of 2022 and, albeit decreasing since then, have remained at elevated levels. In May 2023 inflation rates in euro area countries ranged from 2.0% in Luxembourg to 12.3% in Latvia and Slovakia (Chart A). The current high inflation environment has mainly been caused by adverse supply ... (full story)