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Double-digit inflation has already been raging in a number of European international locations.
By Wolf Richter for WOLF STREET.
German shopper worth inflation began spiking in January 2021, over a yr earlier than Russia’s invasion of Ukraine and already hit 6.0% in November 2021. And power prices had been spiking for a yr as properly.
And in March, shopper worth inflation spiked by 7.6% in comparison with March 2021, in line with the preliminary estimates by the German statistical company Destatis, primarily based on the Eurostat harmonized methodology. Russia’s invasion of Ukraine added gasoline to the hearth that had began raging a yr in the past.
The Eurozone is without doubt one of the locations the place a crazed central financial institution inflicts damaging coverage rates of interest, and thereby damaging bond yields, and more and more damaging curiosity on financial institution deposits, on the financial system and households. The ECB left its damaging rate of interest coverage (NIRP) unchanged at its final assembly, with its deposit rate of interest nonetheless at -0.5%, and it’s nonetheless shopping for bonds.
The ECB’s insurance policies are incomprehensibly reckless in mild of inflation that began exploding in January 2021.
However fee hikes – means too timid, means too late – are actually seen later in 2022. And the ECB has already drastically lower its bond shopping for program and can taper it additional.
Month-to-month, Germany’s shopper worth inflation spiked by a horrendous 2.5% (30% annualized!). Each inflation figures, the year-over-year 7.6% and the month-to-month 2.5%, blew away the already sky-high expectations that economists had dared to harbor.
Based mostly on the German methodology for calculating inflation, shopper costs spiked by 7.3% from a yr in the past, the best since 1981, in line with Destatis.
The company cited power prices (+39.5% year-over-year), and “supply bottlenecks” that brought on costs of products general to spike by 12.3%. Meals costs jumped by 6.2%.
In Spain, shopper worth inflation spiked by 3.0% in March from February (36% annualized!), and by 9.8% year-over-year, the best since Could 1985, in line with preliminary estimates of Spain’s statistical company INE at the moment.
However this spike took off in March 2021 and by December 2021 already hit 6.5%, the best since 1990. The struggle in Ukraine that brought on additional surges of the already spiking power prices made it even worse:
For February, three European international locations had already reported double-digit year-over-year inflation: the Czech Republic (10.0%), Estonia (11.6%), and Lithuania (14.0%), with Belgium not far behind (9.5%). March goes to look lots worse.
The central financial institution of the Czech Republic, which isn’t within the Eurozone and may nonetheless decide its personal financial insurance policies, has already hiked its coverage fee 4 occasions, from 0.5% in July final yr to three.5% at its most up-to-date assembly in February.
And for some much-needed inflation humor: In Turkey, which isn’t within the EU, Erdogan has launched into the wholesale destruction of the lira by firing recalcitrant central financial institution heads and changing them with fee cutters, they usually lower its coverage fee by 5 proportion factors to 14%. And inflation has now exploded to 54%, up from 16% a yr in the past.
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