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The Eurozone’s annual pace of inflation sped to a record 5.8 percent in February, the European Commission’s statistics agency reported, the fourth consecutive month of a record rise.
Energy prices were 31.7 percent higher last month than a year earlier, rising faster than the 28 percent posted in January and the highest since at least 1977, The Wall Street Journal noted.
The war in Ukraine will guarantee even higher oil, gas, and electricity prices ahead.
The spiraling costs place the European Central Bank (ECB) under greater pressure to raise interest rates soon to tackle inflation, a move bank officials have pledged not to make this year.
However, ECB president Christine Lagarde seemed to hint at some flexibility in that position in a 3 February press briefing, as we reported in “ECB About Face: Interest Rate Hikes” (8 Feb 2022).
The bank has been using its interest rate, which it has held at -0.50 percent since 2014, to nurture Europe’s unsteady recovery from the COVID War.
However, new inflation shocks may now pose a greater threat to the recovery than a higher interest rate, forcing the bank to act this year.
TREND FORECAST: The war in Ukraine has given so much additional fuel to inflation that the ECB will, despite its unwillingness, raise interest rates from negative 0.5 percent at least to zero this year.