Euro zone inflation hit a new record high of 5% in December

[Husires]

Euro zone inflation hit a new record high in December, raising more questions about the European Central Bank’s monetary policy.

Preliminary data showed Friday that the headline inflation rate came in at 5% for the month, compared to the same month last year. The figure represents the highest ever on record and follows November’s all-time high of 4.9%.

The increase was mostly due to higher energy prices.

“After reaching 5.0% in December, headline euro-zone inflation should fall this year as the energy component plummets,” Capital Economics said in a note Friday.

Inflation has been in the spotlight after consecutive increases in recent months, with money managers debating whether the European Central Bank should be taking a more aggressive stance to combat rising prices.

Source https://www.cnbc.com/2022/01/07/euro-zone-inflation-december.html?__source=iosappshare%7Ccom.apple.UIKit.activity.CopyToPasteboard


Do you still think we can get inflation at 2% levels in the medium term with the continuation of the current policies or will we need to press the brakes hard?

Is 5% peak inflation, or will we see inflation at more than 10%?

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[Poker Player]

When the official inflation is that, the real inflation is even worse. The problem seems to be that the US is willing to fight inflation soon while in the Eurozone it is not clear, but if the FED really starts to act, the Eurozone will have to follow them. It should be remembered that since its creation, the ECB's most important mission has been to control inflation, while the FED, although it has also taken inflation into account, has been more focused on economic growth.

Germany has a central role in the Eurozone, and the specter of the Weimar Republic's hyperinflation (very unlikely nowadays I'd say) may force a change in monetary policy as well.

Either way, on both sides of the Atlantic, they are in a catch-22 situation. Monetary policy has led to high inflation, and with the economy relying on massive printing like a junkie relies on heroine, cutting back on buying, raising rates, etc, is clearly going to have an effect on the economy.

I guess they are going to try not to let it get out of hand anywhere, reduce the printing and hope that there is no big crisis or stock market crash, in which case they will go back to printing like there is no tomorrow.

[Charles-Tim]

Is 5% peak inflation, or will we see inflation at more than 10%?

I do not know much about the economy of the European countries, as a result of this, I do not know the extent the inflation can be, but I know the net result in long term will still be inflation, as it is happening all over in the world. The inflation again and again lead to fiat declination and the fiat purchasing power will be reduced. That is why we need to go for bitcoin or other asset that can be an hedge against fiat devaluation.

[kryptqnick]

I thought 5% was considered a good inflation rate per year, but 5% in a month sounds like way too much, even for those who argue that some inflation is good to motivate people to spend money rather than hold it. Then again, Bitcoin can easily lose or gain 5% in a matter of a few days, so fiat is still way  more stable than cryptos. That being said, Bitcoin corrects itself eventually and grows in value, whereas fiat is meant to lose some value, and at times like this it simply loses more than anticipated. I think they'll be able to fix this next year, though, especially since everyone's used to the pandemic now, and fewer restrictions are being introduced even during major outbreaks.

[Gozie51]

Well I don't know how inflation can be reduced in these days that the world is consistently withnessing high degree of instability resulting to printing of fiat and effect being high cost of living. The Euro zone is no different from what is happening all over the world. The world is experiencing a change occasioned by constant threat of war and building of warfare equipment, budgets are channelled into security gadgets from the threats of country to country and terrorism, bandits, etc and high level insecurity. Money made for capital projects and development that will increase returns and GDP are used to service insecurity. So inflation will most likely unfortunately stay up.

[so98nn]

There is possibility of higher inflation as the covid is acting at its best in the current period. With the wave of omicron the hospitals are filling up fast and thus most of the workers, job holders, labours, to professionals are getting bed ridden. This affects directly on the business for which they are working. This disturbs the way things are working for them and ultimately the income is not getting circulated. Most of the money is getting diverted into hospitals which is not really an income source for the nation as they have to payback the health care infra.

On bigger picture scale, I see this is one more wave of covid and nothing else. With the cases rising all over the world fears starting to begin and peeps are numb at what they are doing. The inflation is going hot because whole economic chain is getting disturbed again and again.

[Gyfts]

I expect it to go higher. Not that it's particularly relevant, but the US's inflation rate is 7.9%, a 40 year high. Omicron, and every subsequent variant will continue to hit the global economy, and there is no sign that supply chains will relieve themselves if Covid restrictions continue, so I don't expect inflation to stabilize. If the mere announcement of new Covid variants can cause entire markets to tank, as with Omicron, the same cycle will happen with whatever the "new" variant of the quarter is.

There can't be a reasonable expectation of a 2% inflation target if governments decides to restrict it's economy for nearly 2 years by isolating workers and slowing down production.

[Tytanowy Janusz]

Is 5% peak inflation, or will we see inflation at more than 10%?

Its not getting better. Its worse and worse with every next month. In some countries inside Euro zone inflation is already above 8% (f.e my country - Poland) and I can tell you that it will only skyrock from there. Mostly because we just had +20% energy price pump and +80% gas price pump. Some companies have received a gas price increase of several hundred percent. Almost all goods and services uses energy or gas (f.e to bake a bread). This will push prices of everything higher and higher in whole 2022. IMO pick of inflation will be in the fourth quarter of 2022 and in next year if ever (hyperinflation and devaluation scenario).

[Findingnemo]

The new wave is already spreading which forces the country to go for another lockdown or atleast semi lockdown which means the economy will take further hit so there is no chance for the inflation to be lowered in near future and its a great achievement by the government if they keep the inflation rate at this range even though its the worst ever.

[paxmao]

Unsurprising since Germany was around a 6% recently and is the major driver of the economy on EU and most Europe. My thoughts about this revolve about the effect on bitcoin. On one side, inflation tends to be good for assets such as bitcoin that are scarce, but, on the other side, the governments may rise interest rates, even by just a little and that will have a strong negative effect.

[Ultegra134]

Is 5% peak inflation, or will we see inflation at more than 10%?

Its not getting better. Its worse and worse with every next month. In some countries inside Euro zone inflation is already above 8% (f.e my country - Poland) and I can tell you that it will only skyrock from there. Mostly because we just had +20% energy price pump and +80% gas price pump. Some companies have received a gas price increase of several hundred percent. Almost all goods and services uses energy or gas (f.e to bake a bread). This will push prices of everything higher and higher in whole 2022. IMO pick of inflation will be in the fourth quarter of 2022 and in next year if ever (hyperinflation and devaluation scenario).

4.8% here in Greece, gas and electricity costs have increased tremendously the past few months, while I'm now seeing Brent's oil price is also climbing again. A few weeks ago, it went below $60, but now it's up to $82/barrel. The situation is only going to get worse in the future.

The government announced that there is an effort in covering some electric costs themselves (cost of MWH), I'm still skeptical on whether and if it's going to be implemented.

P.S We also got a 2% increase in salary, from 1st of January, we're now saved.(not)

[Davidvictorson]

Euro zone inflation hit a new record high in December, raising more questions about the European Central Bank’s monetary policy.

Preliminary data showed Friday that the headline inflation rate came in at 5% for the month, compared to the same month last year. The figure represents the highest ever on record and follows November’s all-time high of 4.9%.

The increase was mostly due to higher energy prices.

“After reaching 5.0% in December, headline euro-zone inflation should fall this year as the energy component plummets,” Capital Economics said in a note Friday.

Inflation has been in the spotlight after consecutive increases in recent months, with money managers debating whether the European Central Bank should be taking a more aggressive stance to combat rising prices.

Source https://www.cnbc.com/2022/01/07/euro-zone-inflation-december.html?__source=iosappshare%7Ccom.apple.UIKit.activity.CopyToPasteboard


Do you still think we can get inflation at 2% levels in the medium term with the continuation of the current policies or will we need to press the brakes hard?

Is 5% peak inflation, or will we see inflation at more than 10%?

People are getting poor and the currency is loosing value more than ever before, it is the extreme conditions we are living in. In Turkey, the official Turkstat annual  inflation rate is 36%. By the by end of quarter 1 2022, the inflation rate is forecast to reach 45%. This is very crazy.  Aside, the obvious increase in prices of crude and natural gas responsible in part for the inflation in the euro zone, other factors include - Disruptions in supply chain due to pandemic, increase in prices of coal, labour Crisis - workers switched job during pandemic

https://m.bianet.org/english/economy/255641-annual-inflation-tops-36-percent-in-turkey-according-to-turkstat#:~:text=The%20Turkish%20Statistical%20Institute%20has,percent%20annually%20in%20December%202021.

[Tytanowy Janusz]

4.8% here in Greece, gas and electricity costs have increased tremendously the past few months, while I'm now seeing Brent's oil price is also climbing again. A few weeks ago, it went below $60, but now it's up to $82/barrel. The situation is only going to get worse in the future.

The government announced that there is an effort in covering some electric costs themselves (cost of MWH), I'm still skeptical on whether and if it's going to be implemented.

Yesterday my government mentioned an option of implementing centrally regulated praces of basic products (bread, sugar etc.). So I'm less scared of inflation now ... in scared of the collapse of small businesses, food shortages and hunger (thats how "regulated praces" usually ends)

The government announced that there is an effort in covering some electric costs themselves (cost of MWH), I'm still skeptical on whether and if it's going to be implemented.

Same here but only for individuals, not businesses, so I'll have money to buy bread but baker wont have money to produce bread, especially with centrally regulated prices (inflation goes even higher).

It looks like they do all they can to increase inflation rather than decrease it.

[palle11]

but, on the other side, the governments may rise interest rates, even by just a little and that will have a strong negative effect.

If this is going to be a solution to reduce inflation, the point is whether it has worked. Yes increase in interest rate is to discourage borrowing and reduce money in circulation but that has not been working following the economic indices. I think inflation is one big challenge that the world is facing this time.

[Mauser]

Do you still think we can get inflation at 2% levels in the medium term with the continuation of the current policies or will we need to press the brakes hard?

Is 5% peak inflation, or will we see inflation at more than 10%?
[/quote

I really worry about the rising inflation here in Europe. One the one hand politicians keep saying that this just short term effects and we shouldn't worry about it. And on the other hand I see rising prices everywhere. Gas is getting more expensive, food prices are rising constantly and so are all the prices in the shopping mall. For me it doesn't feel like we would see any drop in prices soon. Why would businesses ever consider to lower its prices again? The 5% now are insane and could tricker a downward spiral. For example I heard that all the construction materials will rise another 15% in price next year. How can we stop this cycle if the government is unwilling to intervene?

[Sithara007]

A large chunk of it might have come from the exploding natural gas prices. The prices have increased by 5 to 10 times during the last 12 months, and this has translated in to higher costs for electricity. Many of the industrial facilities that were dependent on piped natural gas has shut down their operations. Anyway, the recent crisis resulted from the refusal of German government to certify the Nord Stream 2 pipeline. If they allow the pipeline to operate, then the prices will come down immediately. Just because of their ego and arrogance, they are suffering losses of billions of €€€.

[davis196]

The Eurozone inflation heavily depends of the electricity and natural gas prices.
Germany is the biggest electricity consumer in the EU and they will shut down their nuclear reactors.
I assume that all the solar power plants in Germany will start working on full scale during the spring and summer of 2022,therefore increasing the electricity production and lowering the prices in Germany,which will influence the prices in the entire EU.
The natural gas prices will stay high until the end of 2022.The natural gas reserves of European countries are full at 75% and the prices will start dropping when they hit levels of above 90%.
A 5% inflation isn't such a big deal.Inflation hitting levels above 10% will become a problem for the households and the economy,but I don't think that the inflation in Europe will be higher than 7.5% during 2022.

[Coyster]

I expect inflation levels to continue to rise all around the world, most of this stems from the negative effects of the pandemic, as a result of lockdowns and printing quite a lot of money it was always expected that the level of inflation was going to gradually go up and that's what we're experiencing currently. It's not just in the Euro zone, even in my country, inflation level is skyrocketing and cost of living is rising daily, cost of commodities and amenities continues to go up and for now we can't see any respite in sight. In my opinion, with more strains of the virus rearing its head, there could still be more lockdowns and money printing coming ahead, thus I don't think we've seen all of this inflation, I expect it to be with us for quite a long time, and like I've always said, the developing countries are definitely going to be hit harder than the developed ones.

[sunsilk]

The omicron variant can possibly make it even higher or worse. We don't know if it's the last variant but there's the other one that's been found in France, the Ihu variant. And every country and region is affected of it which is mostly large countries that are also taking precaution from these variants of concern.

It will depend on how they'll deal with these variants and if they're going to implement lock downs. For sure if more lock downs are being implemented, it'll cause their economy to be slowed down and likely to increase inflation.

[palle11]

It will depend on how they'll deal with these variants and if they're going to implement lock downs. For sure if more lock downs are being implemented, it'll cause their economy to be slowed down and likely to increase inflation.

I think it is total lockdown that affects the economy severely. There is no need for that, the vaccine is playing a huge role already stopping the contact rate. In the Omicron case, there is no total lockdown for countries who are battling with it so a new variant should also be handled same way Omicron is being handled. Total lockdown is a set back, it happened in the past when covid-19 pendamic had no vaccine but with vaccine now there is no need for shutting down the economy.