Euro-zone inflation accelerated to another record high in June, official data showed on Friday, as Russia’s war in Ukraine pushes up energy prices and hurts the European economy.
EU data agency Eurostat said consumer price inflation in the 19 countries using the euro reached 8.6 percent in June, a jump from a previous record of 8.1 percent a month earlier.
Consumer prices in the eurozone have hit records since November, hit by sky-high energy prices, which have risen 41.9 percent in a year on the back of Russia’s invasion of neighboring Ukraine.
But analysts also pointed to the rise in food prices, which accelerated by 8.9 percent, showing that the inflation problem was spreading in the economy.
“In the past we have never had such a high proportion of food. That will have a big impact,” said Philippe Waechter from Ostrum Asset Management.
The European Central Bank has said it will do whatever it takes to bring inflation back to target levels amid political pressure to get energy and food prices under control.
“With eurozone inflation now more broadly based, the outlook for the eurozone remains bleak for the remainder of 2022,” warned Pushpin Singh, an economist at the Center for Economics and Business Research.
“This comes amid a growing possibility of a severe gas crisis in Europe, with Russia using gas exports as a weapon against sanctions,” he added.
– rate hike –
As the conflict rages on, Russia has shown an increasing willingness to halt gas supplies to Europe, a threat that has raised the prospect of energy rationing in the euro zone to weather next winter.
Some analysts took solace in the core inflation data, which excludes energy and food prices, and came in at 3.7 percent, a tiny month-on-month decline.
However, that would not be enough to change course decided at the ECB’s last meeting, when policymakers approved the bank’s first rate hike in more than a decade.
The quarter-point hike, due at their next meeting on July 21, will lift interest rates from their historic lows.
“We will go as far as necessary to ensure inflation stabilizes at our 2% target over the medium term,” ECB President Christine Lagarde said on Tuesday.
The ECB is being pressured by some to curb inflation faster and choose a path more akin to that of the United States, where the Federal Reserve has warned it could trigger a recession to cool prices.
#Eurozone #inflation #hits #record #gas #shortages #loom
