Inflation in the Eurozone maintains a tireless march on the riseand in May it broke records by reaching an interannual rate of 8.1%, pushed by the impact of the war in Ukraine on energy and food prices.
(Read: Ukraine and Russia: what the prolongation of the war could cost)
According to the European statistics agency Eurostat, inflation in the eurozone (the 19 countries of the European Union that adopt the common currency), It reached its maximum record since the beginning of the historical series, in 1979.
(You are interested in: The eurozone economy slows its growth and puts pressure on the ECB)
In April, Eurostat had already estimated a rate of 7.4% (it had originally projected 7.5%, although it subsequently readjusted the indicator slightly downwards by 0.1 percentage point).
Eurozone inflation began a strong upward trend in November of last year, due to the increase in energy prices, and from then on each month it set a new record in its historical series.
At the end of February, however, the start of the military conflict in Ukraine dramatically aggravated this trend for its impact on energy prices and the effects on the world food market.
When considering the components of inflation for May, Eurostat pointed out that energy prices represented an increase of 39.2% in May, above the 37.5% that had been registered in April.
Similarly, food prices (in a statistical set that includes food, beverages and tobacco) had an increase of 7.5%, above 6.3% in April). Among the main economies of the EU, Spain registered a year-on-year inflation of 8.5%, up from 8.3% registered in April.
overall pressure
In addition, the European Union adopted several packages of economic sanctions against Russia for the war in Ukraine, and analysts agree that these restrictive measures will also have an internal effect on the bloc’s economy.
This unstoppable rise in inflation also increased the pressure on the European Central Bank (ECB) to act on interest rates for the first time in a decade.
For its part, the ECB suggested it could raise interest rates in July and September to ease price pressure, a move already taken by the US Federal Reserve and the Bank of England.
Until the start of the conflict in Ukraine, the ECB insisted that the rate increase was a temporary effect caused by the economic recovery at the end of the pandemic.
An assessment by Oxford Economics, released on Tuesday, suggested inflation would peak in the second quarter before slowing “only gradually” through 2022, though it warned of new risks.
On Monday, European leaders agreed to an embargo on their purchases of Russian oil arriving by sea, and according to Oxford Economics, the gesture means “risks are once again skewed to the upside.”
The economic impact of the conflict in Ukraine is of such magnitude that the European Commission drastically cut its forecast for GDP growth in 2022 in mid-May, from an initial expectation of 4.0% to 2.7%, as well as raised its projection annual rate of inflation at 6.1%.
According to the Commission, the “main blow” to economic performance “comes from the prices of energy raw materials.”
Those raw materials had already experienced a strong rise since the last quarter of the previous year, but “uncertainty about supply chains has pushed prices up, while increasing their volatility.”
AFP
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