Eurozone Inflation Reach ATH Of 9.1% As Firms Stop Gas Supply
In August, the inflation in the Eurozone reached an all-time high of about 9.1%. According to Eurostat, this is the highest rate of inflation in history.
Inflation Continues to Soar in Europe as Energy Crisis Worsens
This rate is higher than what most economists predicted before now. Meanwhile, the increasing fuel prices in Europe also led to inflation.
Currently, the region is suffering from increased inflation. The last time inflation in Europe reached this height was over 50 years ago.
Additionally, all member states of the Eurozone have recorded a high consumer price increase. Reuters carried out a survey recently. The new media polled the inflation prediction of various economists.
Unfortunately, their prediction is nowhere close to the current inflation rate. According to statistics, energy prices in Europe have the highest inflation rate, which is 38.3%.
Also, consumables such as food spiked by about 10.6%. Further, the price of non-energy industrial goods increased by 5%, which is lower than that of 2021.
It is worth saying that the Russian-Ukraine crisis also contributed to high energy prices. Moreover, things could worsen as the war does not seem to end soon.
Also, From September 1st to 2nd, the Nord Stream 1 pipeline will be under maintenance. This news has caused panic among the people.
They fear Russia will further reduce the natural gas supply to Germany. The Russian government already reduced supply in June by 40% and again in July by 20%.
The ECB To Meet on September 8th
On August 30th, Gazprom, a Russian-based gas firm, informed the public that it would stop gas supplies to Engie. Engie is a French industrial power group.
In addition, some analysts believe other nations would have to bail Europe from its energy crisis. Others argue that the only option is for European leaders to protect member nations’ energy users.
Other groups expect the ECB (European Central Bank) to increase the standard bank rate. Before now, the central bank has taken similar steps in inflation situation.
Meanwhile, the ECB will have a meeting on September 8th to discuss the way forward. Also, there are reports that most economists believe the ECB would raise the interest rate by 75 bps (basis points).
According to The Street, Bert Colijn, a Senior Economist at ING, argued the European Central Bank should slow down. However, he did not suggest what step they should take.
According to Colijn, several problems are increasing inflation in Europe. He said the gas supply shortage and the issue of drought are compounding the problem.
Also, the economist noted that the ECB has to take action as the economy is already contracting. However, the major question he asked was how hard the ECB must apply the brakes.