The Eurozone’s inflation rate reached a record high in August of 9.1%, the highest ever recorded in history, according to Europe’s statistics office Eurostat. The rate was higher than economists suspected and most of the rise was fueled by Europe’s rising energy prices.
Europe’s Torrid Inflation Continues to Rise, While the Region Faces an Energy Crisis
Europe has been experiencing the most severe inflation since the 1950s. All members of the European monetary union have seen rising consumer prices. Recent polling by Reuters revealed that Eurostat data is much larger than economists had predicted.
Eurozone #inflationRecords broken: In August, consumer prices jumped 9.1% YoY compared to est. 9.1% YoY, surpassing est. A new ATH was also recorded as core inflation rose 4.3%. The rise in core inflation, however, is putting pressure on the economy. #ECBPressure. pic.twitter.com/DI9ruavNUT
— Holger Zschaepitz (@Schuldensuehner) August 31, 2022
Statisticians show that food and energy had the highest inflation increases, with food seeing a 10.6% increase. The non-energy industrial goods saw an increase of 5%, compared to last year’s measured value. The Ukraine-Russia conflict could make the energy crisis worse.
Starting today and up until September 2, 2022, the Nord Stream 1 pipeline is undergoing “maintenance.” The maintenance has people worried that Russian leaders will extend the shutdown of the pair of offshore natural gas pipelines that connect Russian gas supplies to Germany. Already, the Russian Federation has reduced flow by 40% and 20% respectively in June and July.
Gazprom, the Russian giant of gas, announced Tuesday to the public that it would stop supplies of gas to Engie in France. Some believe Europe might need an international energy bailout, while others think European leaders must rescue the energy users in their member nations. Some think the European Central Bank should increase the benchmark interest rate, as has the Federal Reserve in recent years.
Reports indicate that the ECB’s September 8th meeting will be held and economists expect the ECB to raise the benchmark rate 75 basis points (bps). Speaking with The Street, ING’s senior economist, Bert Colijn, opined that the ECB needs to slow down, but how much is the current question at hand.
“Specific European problems continue to push inflation higher — The gas supply crisis and droughts are adding to persisting supply-side pressures on inflation at the moment,” Colijn said. “As the economy is slowing rapidly — and perhaps already contracting at this point — the question is how much the ECB needs to slam the brakes,” the ING economist added.
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