The new Member States have made significant progress in terms of disinflation in the past years, by bringing their average inflation rates close to that of the euro area. Yet, inflation developments in the new Member States continue to be rather volatile and diverse across countries.
Following a substantial rise in inflation in the course of 2004, from on average 1.9% in 2003 to 4.1%, inflation moderated again to 2.5% in 2005. The pick-up in 2004 was mainly driven by factors related to EU accession [such as higher food prices and increases in indirect taxes and administered prices] and the strong increase in world energy prices.