ECONOMY
Eurozone crisis: Von der Leyen dealt blow as EU hit by highest inflation for 13 years

Consumer prices jumped 3.4 percent on year in September, according to the EU’s Eurostat statistics agency. The announcement is another blow for Eurozone consumers after prices rose three percent on year last month – a decade-high figure. The acceleration in annual inflation rate points to further evidence of price pressures as economies recovery from the coronavirus pandemic.

The reading is also likely to cause a headache for policy makers at the European Central Bank as they plot the 19-state currency bloc’s recovery.

The 3.4 percent year on year increase is the highest reading since September 2008 and is ahead of analyst predictions of a 3.3 percent jump.

Prices rose predominantly due to a surge in energy price, caused by a reversal of the oil price crash during the COVID-19 pandemic.

But there was also an impact on production and shipping bottlenecks, with durable goods displaying a price hike of 2.3 percent from August.

With natural gas prices surging and continued bottlenecks impacting sectors from car production to computer manufacturing, inflation could hit four percent by the end of the year.

Such a jump would be twice the ECB’s target, before what the Frankfurt-based bank anticipates will be a quick decline in early 2022.

But supply chain disruptions appear to be worsening, raising the chances that the inflation hump seeps into underlying prices and creates more permanent pressures as firms adjust to pricing and wage policy.

The ECB is expected to maintain that it expects the inflation shock to quickly pass and price growth will linger under target for years to come.

ECB President Christine Lagarde has struck a cautious tone this week, suggesting increased inflation risks require patience and warned against an overreaction.

Market experts have argued that central bankers are underestimating the inflation risk.

BNP Paribas economist Luigi Speranza said: “We think there are high chances that this inflation is less transitory than all central banks, including the ECB, are suggesting.

“Consumers may start demanding higher wages and corporations may accommodate them, on the basis they could pass on higher cost via higher final prices.”

Source: Express.co.uk

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