Upswing at Stable Inflation

Since the middle of 1988 inflation accelerated in most OECD economies. The sharp reaction of monetary authorities in the U. S. and in other countries which suffered from a high rate of inflation, such as the U. K., Canada, Australia, and Sweden, depressed economic growth. The slowdown in aggregate demand eased inflationary pressures. Prices of crude oil dropped in recent months, other raw material prices stabilized. This stabilizing effect on import prices was strengthened in Europe by the firm stance of currencies in the EMS. In Austria several additional factors are at work: The effects of the indirect tax increases which took place at the beginning of 1989 have now been absorbed, public charges and tobacco prices remained almost unchanged in the current year. The influx of foreign labour dampened wage inflation and therefore also the rise in service prices. In the second quarter of 1990 the rate of inflation was a mere 3.0 percent.