Flying prices is largely due to the exceptional rise in energy rates, which jumped by 26%. A return under the objective of the 2% inflation is expected only for 2023.
Le Monde with AFP
The inflation rate in the euro zone reached its highest level in twenty-five years, at 5% over one year, still propelled by the outbreak of energy prices, according to A first estimate published on Friday, January 7th by Eurostat.
NEVER THE STATISTICAL OFFICE OF THE EUROPEAN UNION had registered such a figure since the beginning of its estimates, in January 1997, for the 19 countries adopting the single currency. In November, the inflation of the euro zone had already broken a record at 4.9%.
These figures are largely above the objective of the European Central Bank (ECB) of 2% inflation in the euro area. But for the monetary institution, this inflation is transient. Flying prices in recent months is primarily due to the exceptional rise in gas and electricity rates.
Back under the 2% inflation only in 2023
In December, the annual increase in energy prices reached 26%, far before the other components, EUROSTAT explained in a statement. Food, alcohol and tobacco rates still increased by 3.2%, with those of industrial goods (2.9%) and services (2.4%).
Before Christmas, the ECB had significantly noted its inflation forecasts in the euro zone, already invoking the prices of energy, but also the difficulties of supply in the industry, which disrupt production while the demand of the consumers is particularly strong. The European financial institution now provides for a price increase of 3.2% in 2022, compared with 1.7%.
She anticipates a return below the threshold of only 2% in 2023, a horizon that has stopped moving away in recent months. The president of the institution, Christine Lagarde, judged “very unlikely” a recovery in 2022 of its key rates, currently at their lowest historic. The new Wave of Covid-19, caused by the Omicron Variant, creates additional uncertainty for the European and global economy.
Italy and France under the average of the euro area
“After reaching 5% in December, inflation in the euro zone should fall this year due to the fall of the energy component,” says Jack Allen-Reynolds, Analyst for Capital Economics. “It should be expected to lower inflation rates from now, because the rise in energy will calm down,” also commented Bert Colijn, an economist for the ING Bank
The increase in prices raises the concern of households whose incomes do not increase at the same rate. Anxiety is particularly palpable in Germany, the first European economy, where rising prices, at the highest since 1992, is displayed at the “one” newspapers.
Among the major countries, Spain (6.7%) and Germany (5.7%) have experienced the strongest increases in December, exceeding the European average. Conversely, prices remained more stable in Italy (4.2%) and especially in France (3.4%), according to harmonized European data calculated by Eurostat.
The United States Faced with the same difficulty
Inflation has also been particularly high in the Baltic countries, the highest level for the euro area being registered by Estonia (12%), in front of Lithuania (10.7%). The lowest price increases involved Malta (2.6%) and Finland (3.2%).
The situation is even more tense in the United States, where consumer prices increased by 6.8% in November, a unprecedented pace since June 1982. A bad news for President Joe Biden, who promised to reverse the trend but difficult to adopt its plan for social and environmental spending.
The officials of the US Central Bank, the Fed, consider that it could be justified to raise interest rates earlier than expected, especially if Omicron further strengthens the increase in prices, according to the report of its Last monetary meeting, published on Wednesday. As the ECB, the Fed noted its inflation projections. It has, however, withdrawn from its official communiqué the adjective “transitional”, used since the beginning of the crisis to qualify the rise in prices.