Eurozone inflation rose to 5% y/y in December. This is the highest inflation rate since the introduction of the euro.
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, according to a Eurostat report based on a final estimate.
A month ago, the annual decline in the currency’s value was still at 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.
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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European Central Bank President Christine Lagarde told France Inter radio on Thursday that the central bank had every reason not to respond as aggressively as the Federal Reserve to rising consumer prices. “We are in very different situations. It is clear that inflation is weaker in the euro area, while the economic recovery in the region is not as advanced as in the United States.” The inflation rate in the United States rose to seven percent in December. This is the highest level in nearly 40 years.
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