The inflation rate was 5.1 per cent in January. In December, it was 5.0 percent.
Consumer prices higher prices, ie inflation, continued to accelerate in January, mainly due to higher energy prices.
According to preliminary data published by Eurostat, the European Union’s statistical office, on Wednesday, the inflation rate was 5.1 per cent in January. This may come as a surprise, as market inflation was expected to slow to 4.4 per cent. In December, the inflation rate was 5.0 percent.
In January, energy prices rose by 28.6 per cent year-on-year, food, alcohol and tobacco by 3.6 per cent, services by 2.4 per cent and industrial products by 2.3 per cent.
Energy due to the sharp rise in price, economists are closely monitoring core inflation, which has been deprived of energy and food. Core inflation slowed to 2.3 per cent in January from 2.6 per cent in December. In the market, core inflation was estimated to have slowed to 1.9 per cent.
“The increase in price pressures in the eurozone is, in fact, a positive thing, as it reflects the economic recovery and strong demand. For years, the problem in the euro area has been very low inflation, which has now finally been overcome, ”says the chief economist of the finance company Nordea. Wind Birch.
However, he stresses that accelerating inflation could become a problem if it lasts for a very long time. Then the multiplier effects, for example in wage negotiations, can be significant and inflation expectations can get out of hand.
If companies’ labor costs rise too fast and they have to raise the prices of the goods and services they sell, inflation will rise even faster.
“There is quite a lot of price pressure in the eurozone as prices for goods and services are now being offset by the worst of the coronavirus pandemic. Our view is that accelerating inflation over time could lead to higher wage increases. The difference then is how big. ”
Inflation as a result, the purchasing power of money weakens, as a certain amount of money can be used to buy fewer goods and services than before. In the long run, high inflation will be detrimental not only to wage earners but also to companies and investors.
The acceleration in inflation was one of the reasons for the economic growth in the euro area slowed down considerably at the end of last year.
Of the large economies, Spain, Italy and Germany had the highest inflation rates in January. In Spain it was 6.1%, in Italy 5.3% and in Germany 5.1%.
In Finland, inflation was 3.4 per cent and slower only in France, where consumer prices rose by 3.3 per cent in January.
Unusually rapid inflation is also a tough issue for the European Central Bank, which will announce its monetary policy decisions on Thursday.
Research Director of the financial company Danske Bank Heidi Schauman emphasizes that the acceleration in inflation to 5.1% was a surprise.
“Apparently, for some reason the fall in energy prices in the market did not yet affect the price index. The slowdown in core inflation was expected, but also did not slow down as much as expected in the market. However, it is clear that this will increase the pressure on the European Central Bank, as there is no evidence yet of the slowdown in inflation that the central bank has predicted. ”
In the market, no actual new decisions are expected from the central bank, but the Governor will pay attention Christine Lagarden views on inflationary pressures and possible hints at tightening monetary policy.
According to several forecasts, the European Central Bank will not start tightening monetary policy this year. The central bank has signaled that inflation may temporarily be slightly above 2 percent to stabilize at the target of 2 percent over the longer term.
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