Eurozone inflation rose to 5% y/y in December. Energy prices such as gas and electricity in particular have risen sharply. In addition, more had to be paid for services, industrial goods, food, alcohol and tobacco, Eurostat reports based on a final estimate equal to a preliminary estimate.
A month ago, the annual decline in the currency’s value was still 4.9 percent. This appears to have ended months of sharp increases in inflation. The percentage for December is a record. Inflation has not been this high since the introduction of the euro.
Inflation without sharp fluctuations in food, energy, alcohol and tobacco prices was 2.6 percent last month. This so-called core inflation, an important indicator of the European Central Bank (ECB), also stood at 2.6% YoY in November.
Estonia has the highest inflation
Estonia has the highest inflation in the Eurozone at 12 percent, Portugal and Malta the lowest at 2.8 and 2.6 percent. In the Netherlands, the devaluation of the currency according to the harmonized European method was 6.4 percent higher than the previous year.
The European Central Bank expects inflation, which is now high, to fall below the 2% target over the medium term. Unlike the Bank of England and the US Federal Reserve, European Central Bank policymakers assume that interest rates in the eurozone will not need to be raised this year to curb inflation. UK interest rates have already been raised and another rate hike is expected in February. The Fed has indicated that it will raise interest rates several times this year.
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