LONDON (AP) – Inflation in the 19 countries that use the euro hit an all-time high, driven by soaring food and energy prices, figures showed on Friday.
Consumer prices in the euro area, made up of European Union economies like France and Germany, rose 5% in December from the previous year, according to Eurostat, the statistical office of the EU.
Energy prices led the rise, jumping 26% over the past year, slightly lower than the month before. The rise in food prices accelerated to 3.2%, from 2.2% in November, and the price of goods rose at a faster pace of 2.9%.
However, the price increases for the services declined to 2.4%, suggesting that the omicron variant of COVID-19 has reduced demand for vacation travel. After excluding potentially volatile items such as food and energy, the eurozone’s core inflation rate held steady at 2.6%.
The latest reading breaks the record 4.9% set in November and marks the highest level of inflation since euro record keeping began in 1997, two years before its actual launch.
This means everything from food to groceries to groceries and fuel costs more, as the economic recovery from the pandemic has increased demand for energy and has scolded global supply chains.
The figures highlight how inflation has become one of the main issues facing economic decision-makers.
This is compounding the pressure on the European Central Bank to act on inflation as it keeps interest rates ultra-low to stimulate an economy that is recovering from the depths of the pandemic. The arrival of omicron has made it necessary to rethink all the decisions that could slow down economic growth.
Inflation is not just the EU’s problem. Consumer prices in the United States rose at their fastest pace in 39 years and at their highest level in more than a decade in Britain. Turkish inflation hit 36% last month – the highest in 19 years – and Brazil has seen it accelerate to over 10%, the fastest pace in 18 years.
Energy Futures Suggest Easing
Some economists believe inflation in the eurozone will soon peak, if it hasn’t already. One of the main factors is the price of natural gas, “which has been incredibly volatile in recent weeks and a major driver of the recent spike in inflation,” said Bert Colijn, senior economist at ING Bank, in a report.
The prices of natural gas and oil in the futures markets suggest that energy inflation has likely peaked and is expected to ease, he said.
Now “the question is how steep the downtrend will be,” Colijn said.
He and other economists predict that core inflation will subside but stay at 2% or above this year, giving the European Central Bank more leeway before deciding whether or not to raise them. rate.
Despite the rise of the omicron and its uncertain effects on the global economy, central banks have raised interest rates to combat the spike in inflation or have taken steps in this direction.
The Bank of England last month became the first central bank in a large advanced economy to raise interest rates since the start of the pandemic. The European Central Bank has taken a much more cautious approach, but has also decided to start carefully scaling back some of its stimulus efforts over the next year.
The US Federal Reserve is moving faster than Europe to tighten credit as consumer prices jumped 6.8% over the past year in November.