Inflation rates in the 19 member states of the euro zone soared to 4.9% this month, surpassing Manchester City’s forecast and putting pressure on the euro zone. European Central Bank Review its ultra-low interest rate policy.
Some investors responded to the news, accusing the European Central Bank of allowing inflation to run out of control. Eurostat stated that its initial inflation value in November had reached the highest level since the beginning of the relevant record in 1997, and the euro was launched two years ago.
High oil prices and the cost of imported goods have been blamed on soaring inflation. Eurostat said that energy prices, including oil and gas, have risen by 27% since November 2020, raising the overall interest rate from 4.1% in October.
France’s inflation rate has risen by 3.4%, the highest level in a decade, but Germany is one of the largest economies in the Eurozone. Prices have soared and the inflation rate has risen to 6%. Estonia’s inflation rate jumped by 8.4%, while Lithuania’s rate reached 9.3%.
Since the summer, other advanced economies have also been hit by similar inflationary pressures. The inflation rate in the United States in October was 6.2%, the largest 12-month increase since 1990, while annual prices in the United Kingdom increased by an average of 4.2% during the same period.
Charles Hepworth, investment director at GAM Investments, said that the euro zone’s jump to above the 4.5% average predicted by urban economists “continues to show the incredibly inconsistent argument of central bank officials that this cost-driven inflation is temporary.”
So far, like most central bank governors, the European Central Bank’s Christina Lagarde Insist that inflationary pressures will prove to be temporary and may begin to weaken in 2022.
Hepworth said that despite the emergence of the Omicron variant of Covid-19 and may have a negative impact on recovery from the pandemic, this position will still be under pressure.
“When Lagarde announced that price pressures will not get out of control, it may be Lagarde’s wishful thinking-they are out of control, and it is difficult to understand the argument that this situation will soon abate,” he said.
Excluding potentially volatile items such as alcohol, energy, food and tobacco, the core inflation rate in the euro area also surged from 2% to an annual rate of 2.6% in November.
Some analysts said that a rise in core prices above the ECB’s 2% target indicates that the overall inflation rate has had a secondary effect through higher wage demand.
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However, ECB officials are expected to adopt a more cautious view and will not announce any major policy changes while testing the impact of Omicron.
If this variant starts to affect the level of growth, then prices such as oil may fall, thereby easing the global inflation rate.
Jack Allen-Reynolds, Senior European Economist at Capital economics, Said: “Omicron’s variants have further increased the level of uncertainty, but for the time being, we suspect that its impact on inflation is fairly small.”
