Euro zone inflation hit a 13-year high this month which has been predominantly driven by surging energy prices.
Euro zone inflation rose to 4.1% this month which is up from 4.4% last month and ahead of a consensus forecast of 3.7%, according to data from Eurostat.
Data from Reuters indicates that this is the highest level of inflation since July 2008 and the rise has been predominantly attributed to surging energy prices.
The European Central Bank (ECB) has consistently underestimated the stress created by reopening the economy from Covid-19 lockdowns, which has created high growth but short supply; resulting in increasing pressure on prices.
Energy prices in the euro zone were up 23% year-on-year, making it the biggest contributor to inflation.
Eurostat estimated that Ireland’s annual inflation rate rose from 3.8% to 5.1% in September.
Consumer price growth is now over two times higher than the European Central Bank’s target.
Meanwhile, third-quarter data has revealed that GPD for the bloc grew by 2.2% compared to the second quarter, which is the fastest pace in a year.
Chief Europe economist Andrew Kenningham said that the growth experienced in the third quarter is an indicator that the recovery phase was almost complete.
European Central Bank President Christine Lagarde said that rising energy prices, the recovery in demand and supply bottlenecks are currently driving the inflation rate.
She stated, “While inflation will take longer to decline than previously expected, we expect these factors to ease in the course of next year. We continue to foresee inflation in the medium term remaining below our 2% targets”.
IMAGE – Wikimedia Commons (World Economic Forum from Cologny, Switzerland)