Inflation in Europe eases but is still in painful double digits
Inflation in Europe has eased for the first time in more than a year as energy prices drift down from painful highs, but the double-digit rate still hovers near a record and has robbed consumers of spending power and led economists to predict a recession.
The consumer price index in the 19 countries that use the euro hit 10% in November compared with a year earlier, the European Union statistics agency Eurostat said Wednesday. That was a drop from 10.6% in October, the first decrease since June 2021.
The figure reflected fast rises in prices for food, alcohol and tobacco, at a pace of 13.6% annually, even as energy prices slipped to a 34.9% rate of increase from an astronomical 41.5% in October.
Roaring inflation is being fed by high energy prices, which have been caused by Russia largely cutting off natural gas over the war in Ukraine; bottlenecks in supplies of raw materials and parts; and a rebound in consumer demand after COVID-19 pandemic restrictions ended.
However, natural gas prices have fallen from all-time highs this summer as Europe has largely filled its storage for winter with supplies from countries other than Russia and mild weather has reduced fears of a shortage during the heating season.
The November inflation figure supports predictions that the European Central Bank will slow its rapid rise in interest rates. The bank is expected to go with a half-percentage-point boost at its Dec. 15 meeting, instead of another rise of three-quarters of a point, which it made at its last two meetings, according to economists at Oxford Economics.
European Union leaders enter a crucial stretch this week to make sure runaway energy prices and short supplies do not further weaken their struggling economies and foment unrest.
They said inflation “should remain elevated,” while easing energy prices mean “that today’s data will very likely be followed by a gradual decrease in inflation for the Eurozone.”
European Central Bank President Christine Lagarde said Monday that she does not believe inflation has peaked after reaching record levels and that the bank isn’t through raising interest rates to combat those price spikes. The bank’s inflation target is 2%.
When looking at what is driving inflation, “whether it is food and commodities at large, or whether it is energy, we do not see the components or the direction that would lead me to believe that we have reached peak inflation and that it is going to decline in short order,” she told European lawmakers.
That means the central bank will “continue to tame inflation with all the tools that we have,” primarily interest rate hikes, Lagarde said.
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