Persistent constraints on production meant that supply could not keep up with demand, putting upward pressure on underlying inflation. Russia’s invasion of Ukraine fuelled price pressures further, pushing euro area inflation to double-digit levels in October.
Japan’s economy is likely to follow a recovery trend, with the impact of COVID-19 waning gradually, mainly due to progress with vaccinations. The recovery trend is also supported by an expansion in external demand, accommodative financial conditions, and the government’s economic measures. Thereafter, as the impact subsides, the economy is expected to show higher growth.