The eurozone started 2022 as much as it ended the previous year, with record inflation defying expectations. Now economists are wondering whether persistently high prices could pressure the European Central Bank to change its view that the situation is temporary.
Inflation in January hit 5.1% in January, up slightly from 5% in December, another record for eurozone countries since data collection began in 1999.
Unusually high energy prices, due to tensions between Russia and Ukraine, and the continuing economic downturn from the coronavirus pandemic, are believed to be the main factors driving prices up.
In particular, gasoline prices have skyrocketed in recent weeks. Motor association ADAC says that in Germany, drivers are facing the latest record price for a liter of gasoline, at 1,712 euros, or $7.31 a gallon. Diesel fuel, which is usually more affordable, also hit a high, rising by almost 3 euros to 1,640 per liter, or $7 per gallon.
Months ago, many economists predicted this number would start to fall again as the world’s industrial powers reopened.
“It was a surprise to most people’s expectations,” Marchel Alexandrovich, economist at Saltmarsh Economics, told Reuters. “And there’s a concern that what we’ve seen in the US, in the UK, we’re also seeing in the euro area, and that inflation is proving more persistent than expected.”
Economists expect high prices to dominate the discussion when European Central Bank policymakers meet on Thursday. Observers will be looking to the bank’s president, Christine Lagarde, to signal whether she supports her previous belief that the bull run that began across Europe late last year was temporary. Are not.
In December, the Bank of England became the first major bank to raise interest rates in an attempt to control soaring prices. The The Federal Reserve Bank has signaled that they plan to raise rates in March.
https://www.nytimes.com/2022/02/02/business/european-inflation-ecb.html Europe’s soaring inflation puts more pressure on the ECB to act.