Eurozone inflation hits another record, hitting 10 percent in September

Consumer prices in countries using the euro as their currency rose at an annual rate of 10 percent in September, again hitting the highest level since the euro was created more than two decades ago, European Commission mentioned Friday.

The double-digit pace was a big jump from 9.1 percent in August, the previous record.

Energy prices, which rose at an annual rate of 40.8 percent in September, were again the main contributor to accelerating inflation in the eurozone, prompted by the invasion of Ukraine by Russia, which previously supplied most of Europe’s natural gas. Food prices rose 11.8 percent in September from 10.6 percent in August.

Of the 19 countries in the Eurozone, 10 recorded double-digit aggregate inflation, including the largest economy, Germany, which released its inflation result the day before – 10.9%. This was the highest inflation rate Germany Since 1951, before the reunification of the former East and West.

Estonia, Lithuania and Latvia recorded inflation rates above 22%. The reason was that the increase in wholesale energy prices was reflected in the retail prices paid by households, said Beata Javorcic, chief economist at the European Bank for Reconstruction and Development. The Netherlands, at 17.1 percent in September, up from less than 14 percent the previous month, and Slovakia, at 13.6 percent, was also in the unfortunate group of countries with above-average rates.

In France, where the government has moved aggressively to curb energy prices, inflation has eased slightly, falling to 6.2 percent in September, from 6.6 percent the previous month. Energy inflation has eased there, but food price inflation has increased. However, thousands took to the streets across the country on Thursday to demand a wage increase to counter inflation.

“Inflation is also higher in non-energy industrial goods and services, in particular,” said Lucrezia Richlin, professor of economics at London Business School and former head of research at the European Central Bank. “This is an indication that the energy shock has a broader impact on all other elements.”

Excluding food and energy, so-called core inflation rose 4.8 percent in the year to September, up from 4.3 percent in the previous month.

Ms Reichlin added that there was still a lot of uncertainty about how inflation would develop in the coming months, “because the economy will slow in the future and that will put downward pressure on inflation”.

Pantheon Macroeconomics noted that government policies designed to manage high energy costs will also be a “key swing factor” affecting energy prices over the next six months.

Inflation was eating away at living standards and savings not only in Europe but around the world. Supply chain backlogs and disruptions from the coronavirus pandemic, and the surge in activity that accompanied the reopening of economies, have driven prices up. The rise in energy and food prices that followed the Russian invasion of Ukraine has also fueled inflation, with sanctions imposed by Europe, the United States and its allies.

The European Central Bank They have been aggressively raising rates in the hope of stopping the inflation trend across the Eurozone. On Thursday, European Central Bank policy makers shown They are likely to agree to another rate hike of three-quarters of a point at their next meeting, in late October.

The Fed’s determination to beat inflation with rising interest rates drove prices lower in the US, but also pushed them higher elsewhere. Concern about global political and economic turmoil encouraged investors to invest their money in US stocks and assets as they are considered havens in times of turmoil. Higher interest rates make those investments more attractive by offering greater returns.

The result is that the United States exports some of its inflation to other countries. As the dollar rises, imports from around the world become cheaper in the United States, helping to curb inflation there. The other side is that a file strong dollar It makes imports in other countries, particularly essential imports like energy and food, more expensive to buy in weaker currencies. The dollar is the world’s reserve currency and many commodities, such as oil, are priced in dollars.

Inflation across the European Union, which includes 27 countries, rose to over 10 percent annually already in August, as countries without the euro saw energy and food prices rise to record levels. In the Czech Republic experienced mass protests In terms of high energy cost, the inflation rate reached more than 17% in August, almost the same rate that Poland recorded for the month of September, which has been a record for 25 years.

in Britain, Consumer prices rose 9.9 percent in August from a year earlier, down from 10.1 percent in the previous month, but still close to the fastest pace in 40 years. Families and businesses in Britain are feeling tight on their budgets, hand in hand market turmoil This week it comes from the government new economic strategy That turned mortgages, pensions, and the value of the pound upside down.

Many experts say Europe’s shift away from Russian energy is a slow process and is likely to keep oil, gas and electricity prices at painful levels for years.

When there is a major shortage of energy driving up prices, there is a lot that central bankers can do about it, said Sven Smit, senior partner at consultancy firm McKinsey. He said higher interest rates cannot suddenly create more supply, so prices will remain high.

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