Inflation across the 19-country Eurozone surged in August to its highest in 10 years, posing the challenge for the European Central Bank to look past what it believes to be a temporary rise. Inflation leapt to 3%, a significant rise from the 2.2% inflation in July. This is a far way off the ECB’s 2% target.
The main driver of this inflation increase is deemed to be rising energy costs, however food prices also climbed during the same period. There was also a rise in the price of industrial goods.
ECB policymakers have projected that this may not be the end of rising inflation in the near future, with inflation failing to meet the ECB’s targets for the next few years.
Reflecting on the latest happenings, Capital Economics made the following prediction: “The effects of re-opening and supply problems could intensify in the next few months. But we suspect that they will begin to fade next year as global consumption and trade patterns return to something like their pre-pandemic norms.”
Despite the recent uptick, long-term market inflation projections remain well below 2%.
