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Inflation in the eurozone accelerates and grows at 10%, an unprecedented rate | Economy

A customer pays at a stall in the Maravillas market in Madrid.
A customer pays at a stall in the Maravillas market in Madrid.Manu Fernandez (AP)

Inflation in the euro zone has broken another symbolic bar in September. It has reached 10% for the first time, according to Eurostat. Energy continues to win the game against the rate hikes of the European Central Bank (ECB): prices continue to rise and add pressure on households without noticing at all that the economy is cooling down and that there is very little doubt that in this third quarter of the year even in the eurozone has contracted.

The data will undoubtedly feed the voices that point to a new rise in interest rates of 75 basis points of the official interest rates of the ECB. The economists of the Dutch bank ING have no doubts that this is what will happen at the meeting of the Governing Council of the monetary authority in October. With historical perspective, the current 1.25% is still low and, probably, the pigeons of the Monetary Institute’s Governing Council still do not feel strong enough to set foot on the wall in the demands of the hawks, aggressive supporters of increase to curb inflation expectations.

The calls to avoid salary increases at the same speed as inflation will also resonate strongly, lest the dreaded second-round effects arrive and become a new cause of price increases, although it has been a year since that the warning is heard and there is not much evidence that it is happening. In fact, the influential Bavarian institute of studies IFO already pointed out that the announced increase in the minimum wage in its country from 10.45 euros per hour to 12 euros “would probably exacerbate inflation”. On the other side of the ring, it is likely that arguments will also be found by those who defend raising taxes on the rich and on companies (whose margins are more difficult to control than salaries) so that the States have resources and can help the most vulnerable. hit by these price increases. The chief economist of the ECB, Philip Lane, has already done so this week.

Few could have suspected when the single monetary area was inaugurated more than two decades ago, that inflation would even approach double digits. It has done so hand in hand with an energy crisis whose end depends much more on the will of Russian President Vladimir Putin, who has in his hand the gas tap and the option of ending the war/invasion of Ukraine than on the Central Bank. European. The monetary regulator, created in the image and likeness of the Bundesbank and its proven track record of keeping prices in check, has so far been unable to stop the escalation of inflation.

In less than two months, official rates have gone from negative territory to 1.25% and there are no longer any extraordinary net purchases of bonds. It does not matter, the IPC has risen in a single month nine tenths: it has jumped from 9.1% in August to this 10% in September. Most likely it will not be the ceiling in this crisis. The news of this week, the sabotage of the Nordstream 1 and 2 gas pipelines, have barely had an impact on prices yet and, therefore, their consequences do not appear in these statistics. Goldman Sachs already warns that it has revised its forecasts upwards for this reason and that previously it already forecast that the peak of inflation in the single monetary area would be reached in January, when it would reach 10.3%.

Also several German study institutes (IFO, the also influential Kiel, RWI-Liebniz and IWH-Halle), point in the same direction, at least in Germany. Its average inflation forecast in 2023 for this country, the largest economy in the euro zone, is 8.8%, four tenths more than for this year.

The significant increase in prices in September within the euro zone had been intuited since the previous day. The jump in Germany, whose weight in the statistics is consistent with being the leading economy in the eurozone, was very important: from 8.8% to 10.9%. The end of transport aid and other social support measures this month has been key to this movement. The German degradation – also that of Italy (four tenths on the rise, up to 9.5%) has exceeded the improvement in France (6.2%) and Spain (9.35%), countries in which prices have slowed somewhat his climb.

Although the big ones are the ones that have the greatest impact on inflation, the energy crisis hits much harder on the shores of the Baltic. The three republics (Estonia, Latvia and Lithuania) far exceed the annual increase of 20%. Behind them comes the Netherlands (17%), a country that, despite this, continues to resist changing the community mechanism for setting electricity prices and separating it from what is happening in the gas market.

This fuel, gas, is what is behind much of what is happening with prices -and, by extension, with the economy-. The estimate released by Eurostat shows that the impact of energy prices, which have become more expensive in a year above 40%. Having remained at these levels for many months, contagion to other products in the household shopping basket has been inevitable – the impact of fuels on the rest of the chain comes through transport and logistics or as raw material. cousin-. And so, when what happened to prices is observed when volatile components such as energy, alcohol or fresh products are eliminated, the increase is 4.8%.

It helps to understand the impact of this rise in prices the fact that this last percentage, that 4.8% of what is technically called core inflation and which is the lowest of the different price indices, is still seven tenths higher than the evolution of wages in the euro zone until June, latest edition of the labor cost survey. It shows that salaries during the first half of the year have risen in the monetary area by 4.1%, seven tenths less.

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