EXPLAINER: What does record inflation mean for the eurozone?

LONDON – Inflation successful the 19 countries that usage the euro currency deed its highest level connected record, led by surging nutrient and vigor costs, figures released Friday show.

Here's a person look astatine the data:

WHAT DO THE NUMBERS SAY?

Consumer prices successful the eurozone, made up of European Union economies similar France and Germany, rose 5% successful December compared with the erstwhile year, according to Eurostat, the EU's statistic office.

Energy prices led the increase, jumping 26% implicit the past year, somewhat little than the erstwhile month. The boost successful nutrient prices picked up steam to 3.2%, from November’s 2.2% rate, and the terms of goods roseate astatine a faster gait of 2.9%.

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However, terms increases for services eased to 2.4%, suggesting that the omicron variant of COVID-19 crimped request for vacation travel. After stripping retired perchance volatile items specified arsenic nutrient and energy, the eurozone’s halfway ostentation complaint held dependable astatine 2.6%.

WHY IS IT IMPORTANT?

The latest speechmaking smashes the grounds of 4.9% acceptable successful November and marks the highest level of ostentation since recordkeeping for the euro currency began successful 1997, 2 years earlier its existent launch.

It means everything from food astatine the market store to buying trips and substance are costing much arsenic the economical betterment from the pandemic has accrued request for vigor and snarled planetary proviso chains.

The numbers underline however ostentation has emerged arsenic 1 of the main issues that economical policymakers are grappling with.

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It compounds unit for the European Central Bank to enactment connected ostentation since it's kept involvement rates ultra-low to stimulate an system recovering from the depths of the pandemic. The accomplishment of omicron has forced a rethink of immoderate decisions that mightiness throttle economical growth, and analysts don’t expect the European slope to rise rates until 2023.

Inflation is not conscionable the EU's problem. Consumer prices successful the U.S. person risen astatine their fastest gait successful 39 years, and astatine their highest clip successful much than a decennary successful Britain. Turkish ostentation deed an eye-watering 36% past period — the highest successful 19 years — and Brazil saw it accelerate to much than 10%, the fastest gait successful 18 years.

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WHAT DO THE EXPERTS THINK?

Some economists deliberation ostentation successful the eurozone volition highest soon, if it hasn’t already. One large origin is natural state prices, “which person been incredibly volatile successful caller weeks and a ascendant operator of the caller ostentation surge,” Bert Colijn, elder economist astatine ING Bank, said successful a report.

Prices for earthy state and lipid successful the futures markets suggest vigor ostentation apt peaked and is acceptable to ease, helium said.

Now, “the question is however steep the downward inclination volition be,” Colijn said.

He and different economists foretell that halfway ostentation volition easiness but enactment astatine oregon supra 2% this year, giving the European Central Bank immoderate breathing country erstwhile it comes to a complaint decision.

WHAT ARE OTHER COUNTRIES DOING?

Despite omicron surging and its uncertain effects connected the planetary economy, cardinal banks person been raising involvement rates to combat soaring ostentation oregon taking steps successful that direction.

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The Bank of England past period became the archetypal cardinal slope successful a large precocious system to rise involvement rates since the pandemic began. The European Central Bank has taken a overmuch much cautious attack but besides decided to commencement cautiously dialing backmost immoderate of its stimulus efforts implicit the adjacent year.

The U.S. Federal Reserve is moving faster than Europe to tighten recognition arsenic user prices jumped 6.8% implicit the past twelvemonth successful November.

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