Eurozone has record inflation with high energy prices - ISTOÉ MONEY

Higher energy prices help trigger eurozone inflation – AFP/Archives

Annual inflation in the euro zone stood at 5% in December, its highest level in the last 25 years, due to high energy prices – according to statistics released this Friday (7).

The European statistics agency, Eurostat, stated that such a figure has not been registered since it started to monitor it in 1997.

This is Eurostat’s first estimate for inflation in the eurozone in 2021, which confirms the trend caused by the sharp rise in energy prices in the 19 countries that have adopted the euro as their currency.

According to Eurostat, energy prices rose 26% in December, far above all other components of inflation. Food, alcohol and tobacco, for example, had an increase of 3.2%, against 2.2% registered in November. Industrial goods closed, in turn, with a high of 2.9% in December, compared to 2.4% in November. The services sector, on the other hand, experienced an increase of 2.4% in December, against 2.7% in the previous month.

– Above targets –

In November 2021, inflation in the euro zone had already broken a record, standing at 4.9% year-on-year, in a chain of increases that began in August.

These numbers are well above the target of the European Central Bank (ECB), which seeks annual inflation “close to, but below 2%”, in the countries of the euro zone. For the monetary institution, however, this inflation is temporary and will decrease in 2023.

At the end of 2021, the ECB significantly raised its inflation forecasts for the euro zone, citing energy prices. He also mentioned difficulties in supply chains, in a context of strong demand.

Now, the ECB works with an inflation forecast of 3.2% in 2022, with a return to the level of 2% only in 2023, in a horizon that, in recent months, has not stopped moving, always moving away from this percentage.

– Pressure in Spain –

Among the major eurozone countries, Spain (6.7%) and Germany (5.7%) posted higher inflation than the European average last month. In Italy (4.2%) and France (3.4%), inflation was below, described Eurostat.

Inflation was particularly high in the Baltic countries, starting with Estonia (12%) and Lithuania (10.7%). The countries that registered the most moderate price increases were Malta (2.6%) and Finland (3.2%).

This inflationary picture is aggravated by the uncertainties generated by the rapid expansion of the omicron variant of the coronavirus.

Analyst Jack Allen Reynolds of consulting firm Capital Economics said, however, that he was confident of a pullback in energy price pressure.

“Inflation in the euro zone should fall this year, due to the drop in the energy component,” he said.

Also optimistic, Bert Colijn, an analyst at ING bank, commented that the 5% reported by Eurostat is indeed “a historic number, but we can expect to see lower inflation rates from now on.”