Inflation in EU highest in 10 years

Data released by the European Statistics Agency (Eurostat) over the weekend showed that inflation in the European Union (EU) in July increased to 3.2%.

This is the highest inflation rate in 10 years in the EU. Meanwhile, in the Eurozone, consumer price inflation increased by 3% year-on-year.

Euro coin in Dortmund, West Germany. File photo: AFP
Euro coin in Dortmund, West Germany. File photo: AFP

According to a reporter in Europe, this is the first time that inflation in the EU has significantly exceeded the target of the European Central Bank (ECB). The ECB sets an inflation target at 2% per year. In light of the current developments, central banks have announced that they will reduce the rate of bond purchases in an effort to boost economic growth.

The current situation across the EU and Eurozone is different from a year ago, when the first wave of the COVID-19 epidemic hit the economy hard. In the EU, prices in August rose 0.4% year-on-year, while in the Eurozone, prices fell even 0.2%. Malta has the lowest inflation rate at 0.4%. In Greece, prices increased by 1.2% year-on-year and in Portugal by 1.3%. Prices rose fastest in Poland, Lithuania and Estonia, where inflation was as high as 5%. In the Czech Republic, the inflation rate in August stood at 3.1%, 0.1% lower than the EU average.

Economists warn higher energy prices will push up inflation across Europe this year, hurting consumers and threatening the region's post-pandemic economic recovery.

Gas prices in Europe have tripled this year and peak demand in winter has yet to begin. Equinor (Norway), one of Europe's largest gas suppliers, said high energy prices could last until 2022 and could spike.

The Eurozone energy consumer price index rose 15.4% in August to the highest level since the global financial crisis in 1996, sending inflation in the region to 3%. This is much higher than the ECB's 2% inflation target. However, ECB officials and economists said they expected the increase to be temporary due to timing factors such as supply chain disruptions as developed countries recover from the pandemic.

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