Key Takeaways
- Eurozone inflation hit a new record high of 10%, up from 9.1% in August and above consensus projections of 9.7%.
- Energy prices increased 40.8% year-on-year, up from 38.6% last month, followed by food, alcohol, and tobacco at 11.8%, up from 10.6% in August.
- The high inflation rate is expected to influence the European Central Bank decision to raise interest rates
Inflation is soaring across the world, and European countries are not safe from it. As per the recent Eurostat data in September, Eurozone inflation hit a new record high of 10% up from 9.1% in August and above consensus projections of 9.7%.
The report points out that prices increased across all sections, from volatile food to fuel. Energy prices increased 40.8% year-on-year, up from 38.6% last month, followed by food, alcohol, and tobacco at 11.8%, up from 10.6% in August.
Commenting on the latest development, Seema Shah, chief global strategist at Principal Global Investors, said, “With labor markets still tight and inflation gradually becoming more entrenched in the Euro area economy, today’s numbers will only embolden the ECB to focus solely on inflation, giving them the green light to introduce another sizeable policy rate hike – even as the economy rushes headlong into a tough winter and recession,” Shah said.
The numbers in the latest report are expected to influence the European Central Bank’s decision to raise interest rates to higher levels in its upcoming October meeting. As per Jessica Hinds, senior Europe economist at Capital Economics. the central bank’s rate-setting council will likely raise its benchmark rates by outsized three-quarters of a percentage point at its next meeting on October 27.
Recently the U.S. Federal Reserve decided to raise interest rates by three-quarters of a percentage point, or 75 basis points, for the third consecutive time to cool down the U.S. economy and also signaled more large increases to come this year.
U.S. inflation hit a concerning 8.3% in August, while the United Kingdom‘s Consumer Price Index rose by 9.9% in the 12 months to August 2022. Germany’s statistics agency on Thursday also announced that the country’s September inflation rate was the highest since late 1951.
According to the Organization for Economic Cooperation and Development prediction, the average inflation rate in the eurozone will be 8.1% this year, up from 7% when it last released forecasts in June. In the U.S., the organization predicts average inflation to be 6.2%, up from 5.9% in June. In 2023, it expects eurozone inflation to average 6.2% and U.S. inflation to average 3.4%.
