Eurozone inflation hits 13-year high as energy prices skyrocket – .

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Eurozone inflation hits 13-year high as energy prices skyrocket – .


Steam escapes from the cooling towers of the Lippendorf power station south of Leipzig, Germany.
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LONDON – Eurozone inflation hit a 13-year high in September as the bloc battles soaring energy costs.
Headline inflation stood at 3.4% last month, according to preliminary data from the European statistical office Eurostat. This is the highest level since September 2008, when inflation was 3.6%. It comes after German consumer prices rose 4.1% in September – the highest level in nearly 30 years.

The rise was driven by soaring energy prices, which heightened the concern of policymakers. The price of gas for the first month at the Dutch hub TTF, a European benchmark, has increased by almost 400% since the start of the year.

Moreover, this record-breaking energy price race is not expected to end anytime soon, with energy analysts warning that market nervousness is likely to persist through the winter.

France has become the latest country to step up measures to mitigate costs for consumers. Prime Minister Jean Castex said on Thursday the government would block further increases in natural gas prices as well as increases in electricity tariffs. However, before these measures take effect, gas prices will rise 12.6% for French consumers from Friday.
Italy, Greece and Spain have also taken steps to deal with the price increases.

Temporary?

Central bankers believe recent spikes in inflation are “transient” and price pressures will ease in 2022.

“We have revised upwards many of our projections over the past three quarters. Things have accelerated and it’s true for growth, it’s true for inflation, and it’s true for jobs, ”Christine Lagarde, president of the European Central Bank, told CNBC. in September.

“So in a way that’s a bundle of good news because it means our economies are responding. “

However, she added that the pressures on energy prices would likely outlive other inflationary factors, including disruptions in supply chains.

“Energy is going to be an issue that will probably stay with us longer. Because we are also in the process of switching from energy sources fueled by the fossil fuel industry, ”said Lagarde.

But some economists wonder if all the price pressures are temporary – and if the central bank needs to adjust monetary policy more quickly.

“The recent surge will do little to bridge the gap between the two inflation camps: one arguing that the drivers of inflation are transient and base effects will disappear or even reverse year round. next and the other sees a large risk of accelerating inflation. We’re staying somewhere in the middle, ”Carsten Brzeski, global macro manager at ING Germany, said in a note on Thursday.

“Consistently higher inflation rates and a high risk that the ECB has indeed entered a period in which its long-term inflation forecasts often turn out to be too low, compared to too high over the years leading up to the pandemic, will put more pressure on how many monetary accommodations that the eurozone economy really needs, ”he added.

Analysts expect the ECB to give more details on its monetary policy at a meeting in December. Its emergency pandemic purchasing program, known as PEPP, is due to end in March and ECB observers predict a reduction in the level of purchases in the final months of the program.

“Even though inflation stays higher for longer, we still believe that the [European Central] The bank will stick to its accommodative approach, ”said Andrew Kenningham, chief economist for Europe at Capital Economics, in a note Thursday.

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