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Published: 14:23, January 11, 2022 | Updated: 14:24, January 11, 2022
Eurozone's inflation rate rises to record high
By Earle Gale in London
Published:14:23, January 11, 2022 Updated:14:24, January 11, 2022 By Earle Gale in London

A woman wearing face mask to protect against COVID-19 walks with a shopping bag along a shopping center in Paris, Dec 17, 2021. (MICHEL EULER / AP)

Rampant inflation within the European Union, caused by soaring energy prices and the spiraling cost of food, is worrying economists.

The record high of 5 percent for December amounts to the fastest rise in prices since the single-currency zone was founded in 1999.

Economists polled by Reuters had expected 4.7 percent.

Carsten Brzeski, head of global macro research at ING, told the Financial Times that economists hope the rate goes no higher.

"This should be the peak, but headline inflation will stay elevated, at least until late summer, especially as higher wholesale energy prices are passed through to retail consumers and other parts of the economy," he said.

The eurozone, a monetary union of 19 of the EU's 27 member states, uses the euro for currency and shares economic policy. The eight EU members not currently in the zone have vowed to join it eventually.

The zone-which counts France, Germany, Italy, the Netherlands, and Spain among its members-is one of the world's major economic areas.

The Financial Times said the unexpectedly high inflation rate will put pressure on the European Central Bank to end its monetary stimulus spending more quickly than planned.

The bank set a target of limiting inflation to 2 percent last year, but has now revised that to 2.6 percent for last year and 3.2 percent this year.

Philip Lane, the ECB's chief economist, told Irish broadcaster RTE that 5 percent inflation feels especially high after a long period of ultralow price growth.

"We do think inflation pressures will ease over the course of this year," he added.

The ECB said prices rose more sharply than hoped for as people began spending again after the lifting of pandemic restrictions, and as shortages caused by supply chain issues increased demand.

Eurostat, the EU's official statistical division, said the rise was largely down to more expensive food, alcohol, and tobacco. Additionally, energy prices were 26 percent higher in December than a year earlier.

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