A record 4.9% euro zone inflation puts pressure on the European Central Bank

Eurozone inflation rose to 4.9% in November, a record high since the creation of the single currency more than 20 years ago, prompting policymakers and economists to warn that price pressures may last longer than expected.

Driven by soaring energy prices, the Eurozone inflation rate-as measured by the harmonized consumer price index-exceeded the 4.5% average expected by economists surveyed by Reuters.Rising may put more pressure on the European Central Bank Reduce its monetary stimulus.

Some investors said that the European Central Bank seemed to be too relaxed about price increases. “This may be wishful thinking of the ECB President [Christine] Charles Hepworth, director of investment at GAM Investments, said that when Lagarde announced that price pressure would not get out of control-they were out of control, and it was difficult to understand that this pressure would soon abate.

The outgoing Bundesbank governor Jens Weidmann warned the European Central Bank on Tuesday to “be alert to any pressure to keep its very accommodative course longer than the price outlook requires”.

German consumer prices rose by 6%, the fastest increase in nearly 30 years, and it is causing political unrest.Germany’s incoming finance minister Christian Lindner wrote on Twitter “Inflation raises reasonable concerns”, adding: “In the case of currency devaluation, we will observe how it develops after the pandemic.”

The European Central Bank said that many one-off inflation reasons such as soaring energy prices, supply chain bottlenecks and the reversal of German consumption tax cuts will subside next year, in an attempt to calm the anxiety about rising prices.

Although the surge in coronavirus cases and the spread of new variants have brought more uncertainty to the economy, there are signs that ECB officials doubt whether inflation will fall as quickly as they thought.

In an interview with Les Echos published on Tuesday, the Deputy Governor of the European Central Bank, Luis de Guindos, stated: “By 2022, the bottleneck may last longer than expected.” There is a risk that inflation will not fall as quickly and as we predicted.”

Energy prices in November rose by 27.4% year-on-year, which was the biggest driver of inflation in the group’s 19 countries. However, food, service and commodity prices are all rising faster than the European Central Bank’s 2% target.

The core inflation rate, which the European Central Bank monitors for potential pressures, climbed to 2.6% from 2% a month ago, as it eliminated volatile energy, food, alcohol and tobacco prices. Part of the reason for the increase in service prices is the lower weight of package holidays in the official inflation basket to reflect the decline in tourism during the pandemic.

Luigi Speranza, chief global economist at BNP Paribas, said: “These numbers like what we see today are hard to ignore, so the compensation requirements for higher wages for workers will become higher and higher.”

Economists are trying to assess the impact on inflation Coronavirus cases hit a record high And spread Omicron variants in Europe.

Capital Macros Senior European Economist Jack Allen Reynolds said that due to falling oil prices, the variant may reduce overall inflation, but it may push up commodity prices due to the increased supply chain deadlock caused by the pandemic. He predicts that the euro zone inflation rate will only fall below the ECB’s 2% target by the end of 2022.

The European Central Bank will release a new inflation forecast on December 16, which is generally expected by the market Increase them This is different from the data released in September, when it predicted that it would fall from 2.2% this year to 1.7% next year and 1.5% in 2023.

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