The rise in Eurozone prices has reached new heights as electricity and food prices rise

Eurozone inflation rose to 5 percent in December, setting a new record since the single currency was formed more than two decades ago and doubting how inflation will end this year.

In the wake of rising electricity and food prices, annual inflation in the euro area – as measured by consumer prices – surpassed that of Reuters economists, who predicted a 4.7 percent rise, down slightly from 4.9 percent in November. .

This dramatic increase should force the European Central Bank to reduce its borrowing faster than planned. While most economists expect inflation to decline from January onwards, they are expected to remain above the 2 ECB’s 2 percent high level this year.

“This should be at an all-time high, but inflation will remain high until the end of the summer, especially as high electricity prices are offered to consumers and other sectors of the economy,” said Carsten Brzeski, head of global research at ING. . “A number of corporate clients have told us they have raised prices by 2022.”

Inflation has skyrocketed in recent months as the eurozone economy deteriorates as a result of the outbreak, labor bans have been lifted and it has become increasingly difficult to meet the demands, with greater efficiency. electricity bills and creating a shortage of more resources.

Eurostat he said prices rose by 0.4 percent from last month, due to rising prices for food, alcohol, tobacco and other items. Electricity prices have risen 26 percent since last year, down slightly from last month.

Aside from fluctuations in electricity and food prices, inflation was stable at 2.6 percent.

Many economists expect the rise in eurozone prices to begin to decline in the coming months as a result of Germany’s temporary tax cuts caused by declining communications, rising electricity prices and global crises.

However, European oil prices nearly doubled to Christmas and jumped again this week after Russian goods dropped. Barriers to the supply chain continue to slow down and increase the cost to manufacturers, raising the cost of most purchases.

“The rapid rise in the price of retail prices in Spain, as well as in Italy, though government intervention, which was a big surprise for us in December, “said Jacob Nell, chief of European economics at Morgan Stanley.

The ECB responded to a growing price hike last month, saying its € 1.85tn strike rate would halt purchases in March as part of a “gradual” reduction in its volume reduction measures.

The central bank also pushed the eurozone prices down 2.6 percent in 2021 and 3.2 percent in 2022, while predicting it would fall below the target of 2 percent next year.

Philip Lane, an ECB economist, said that 5 percent of inflation felt “very strange” after a long period of significant growth in the eurozone. But he told an Irish reporter RTE, “we expect inflation to decline this year” so the issue of inflation “does not exist”.

Proponents of her case have been working to make the actual transcript of this statement available online. The futures of the stock market are rising in price by 0.1 per cent on the ECB deposit rate in October.

Jack Allen-Reynolds, a European economist at Capital Economics, said the rise in eurozone prices should remain above 2 percent “at least until the fourth quarter” and predicted that the ECB would “start developing financial measures in 2023.”