By
Bena Ilyas
March 25th, 2024
The inflation that is being experienced in the Euro Zone is not a new experience as other countries are also battling the same.
The inflation pressures that are being experienced by most countries around the world are having a much more untold effect in the Euro Zone. According to data released by the European Statistics Office on Monday, headline inflation in the Euro Zone topped 10.7%, the highest it has recorded since the formation of the 19-member body.
The inflation within the Euro Zone is a significant indication of the high cost of living that many residents are battling at this time. The situation within the region has even been further exacerbated by the ongoing Russian-Ukraine war, a conflict that has limited the inflow of hydrocarbons that can better serve homes and industries.
The data released showed that key aspects of consumer goods recorded massive inflation greater than the headline figure. Energy costs have soared by 41.9% up from 40.7% in September, and the cost of other essential items particularly food as well as alcohol and tobacco have also recorded an over 13% inflation rate, up from the 11.8% recorded in August.
The inflation data reported by the Eurozone came after individual countries reported their own inflation for the month of September. Per the data released, inflation in Italy soared by 12.8%, that of Germany jumped by 11.6% while the French inflation reading came in at 7.1%. While these readings are of much concern to the individual countries, member states like Latvia, Lithuania, and Estonia have had it rougher with the inflation topping more than 20% respectively.
Potential Remedy to the Inflation in the Euro Zone
The inflation that is being experienced in the Euro Zone is not a new experience as other countries are also battling the same. The European Central Bank (ECB), like any other, is committed to fighting this inflation until it retouches the 2% target.
One of its major models to tackle inflation is by raising its interest rates across, a move it has resorted to hiking rates by 75 basis points twice thus far.
With the move to hike interest rates into the near future already confirmed, the ECB highlighted how much “substantial progress” it has made thus far in normalizing rates in the region, but it “expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target.”
The fight against inflation can be a very tricky one. While the hike curbs are notably poised slow down inflation, they can also push the economy into a recession and as such, gives policymakers the scare to be cautious with how well rates are hiked.
The United States Federal Reserve is currently experiencing this dilemma and industry experts are expecting a slowdown in the 75 basis-point increments it has been announcing for a while now. With the US Fed set to meet tomorrow, Nov 1, all eyes will be fixed on the apex bank in what could be a precedent-setting move for all other global central banks.