What’s going on?
Data out on Friday showed that eurozone inflation hit double-digits for the first time ever last month.
What does this mean?
Europe can’t catch a break right now: with Russia squeezing gas supplies harder than anacondas squeeze capybaras, energy prices have headed steadily skywards – seeing a 41% increase last month on the same time last year. That jump played a key role in boosting overall consumer prices, which went up a record 10% last month and outstripped expectations for the fifth month running. But it wasn’t just one thing: even when you strip out volatile factors like energy and get down to what’s known as “core inflation”, the bloc still saw an all-time high. Given that, the European Central Bank will probably have to continue raising interest rates aggressively next month: if investors are right, the region could be facing its second-straight 0.75 percentage point hike.
Why should I care?
Zooming in: Remember the nuances.
Yes, most of the countries in the region saw double-digit inflation. But the numbers actually differed significantly from place to place. Take France: there the government’s subsidies on energy bills brought inflation down to 6.2%, the lowest in the bloc. On the other (less fortunate) end of the spectrum were three Baltic countries – each of which clocked figures in the twenties. Even Germany registered a 71-year high of 10.9%, a figure the government is looking to slash with a whole swathe of measures designed to cut energy costs.
The bigger picture: Look to the future.
Last week, the OECD upped its 2023 eurozone inflation forecast to 6.2%. Makes sense: there’s only so much the central bank can do by hiking rates. After all, the problem’s mainly supply driven, and interest rate rises hit demand more directly. That could be why some economists think inflation won’t start easing until the start of next year, when energy prices are finally expected to drop. Here’s hoping.
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Originally Posted September 30, 2022 – The Eurozone Euro-Groans At Record Inflation
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