Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Euro-Zone Inflation Hits Record

Euro-Zone Inflation Hits Record

Euro-area inflation surged to a fresh record, surpassing expectations and bolstering calls for the kind of aggressive interest-rate increases being deployed by central banks across the world.

Driven once more by soaring food and energy costs, consumer prices jumped 8.6% from a year earlier in June -- up from 8.1% in May. Economists surveyed by Bloomberg saw a gain of 8.5%. The median estimate in the poll has fallen short for 11 of the last 12 months.

The data reflect an escalating squeeze on households and firms across the 19-member currency bloc, where France, Italy and Spain reported new all-time highs this week. Germany, the continent’s No. 1 economy, only saw a slowdown thanks to fuel-tax cuts and public-transport discounts that are temporary. In the Baltic region, price growth has shot past 20%.

Governments have weighed in with billions of euros in support, but their ability to help is limited after spending huge sums during the pandemic. As consumers grapple with the soaring cost of living, retailers like Zalando SE and Hennes & Mauritz AB are suffering. Sales at automakers such as Volkswagen AG have been sinking for months.

While on the brink of a first rate increase in more than a decade, the European Central Bank has faced criticism for letting inflation zoom so far beyond its 2% target as peers like the Federal Reserve unleash hikes that have reached 75 basis points.

Inflation Pain
Consumer prices are soaring across the euro area

The ECB blames Europe’s woes on a post-lockdown spike in energy costs that snowballed when Russia attacked Ukraine. While that relentless advance in prices has broadened, a gauge of underlying inflation, excluding energy and food, inched down to 3.7% in June.

German two-year yields -- which are the most sensitive to changes in interest rates -- were three basis points lower at 0.62%, having earlier risen to 0.69% while money markets trimmed tightening wagers, pricing 146 basis points of hikes by year-end.

With signs that expectations for future prices are headed higher, the ECB plans to raise its deposit rate by a quarter-point in July. Belgian central bank chief Pierre Wunsch this week called that move a “done deal” -- despite his Governing Council colleagues from Latvia and Lithuania urging tougher action to be an option.

The following ECB meeting is in September, with Friday’s data all but locking in the half-point rate hike that’s been lined up for then if the inflation backdrop doesn’t improve. That would bring the deposit rate -- currently -0.5% -- back above zero for the first time in eight years.

Beyond that, the ECB plans a “sustained” cycle of increases, though economic headwinds are strengthening. Manufacturers are reporting a steepening downturn in demand, a survey by S&P Global published Friday showed, while mounting fears of winter power outages if Russia limits natural gas supplies are raising the prospect of a recession.

“This surge in prices does not reflect excess demand in the euro area,” said Fabio Panetta, an Executive Board member who is one of the ECB’s most dovish officials. “Consumption and investment remain below their pre-pandemic level and even further away from their pre-pandemic trend. With wages rising at a moderate pace, real incomes have been severely hit by the surge in import prices.”

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Shock Within Iran’s Leadership: Khamenei’s Failed Plan to Launch 1,000 Missiles Against Israel
Wreck of $17 Billion San José Galleon Identified Off Colombia After 300 Years
Man Convicted of Fraud After Booking Over 120 Free Flights Posing as Flight Attendant
Iran Launches Extensive Missile Attack on Israel Following Israeli Strikes on Nuclear Sites
Beata Thunberg Rebrands as Beata Ernman Amidst Sister's Activism Controversy
Hungarian Parliament Approves Citizenship Suspension Law
Prime Minister Orbán Criticizes EU's Ukraine Accession Plans
Hungarian Delicacies Introduced to Japanese Market
Hungary's Industrial Output Rises Amid Battery Sector Slump
President Sulyok Celebrates 15 Years of Hungarian Unity Efforts
Hungary's Szeleczki Shines at World Judo Championships
Visegrád Construction Trends Diverge as Hungary Lags
Hungary Hosts National Quantum Technology Workshop
Hungarian Animation Featured at Annecy Festival
Israel Issues Ultimatum to Iran Over Potential Retaliation and Nuclear Facilities
UK and EU Reach New Economic Agreement
Coinbase CEO Warns Bitcoin Could Supplant US Dollar Amid Mounting National Debt
Trump to Iran: Make a Deal — Sign or Die
Operation "Like a Lion": Israel Strikes Iran in Unprecedented Offensive
Israel Launches 'Operation Rising Lion' Targeting Iranian Nuclear and Military Sites
UK and EU Reach Agreement on Gibraltar's Schengen Integration
Israeli Finance Minister Imposes Banking Penalties on Palestinians
U.S. Inflation Rises to 2.4% in May Amid Trade Tensions
Trump's Policies Prompt Decline in Chinese Student Enrollment in U.S.
Global Oceans Near Record Temperatures as CO₂ Levels Climb
Trump Announces U.S.-China Trade Deal Covering Rare Earths
Smuggled U.S. Fuel Funds Mexican Cartels Amid Crackdown
Austrian School Shooting Leaves Nine Dead in Graz
Bezos's Lavish Venice Wedding Sparks Local Protests
Europe Prepares for Historic Lunar Rover Landing
Italian Parents Seek Therapy Amid Lengthy School Holidays
British Fishing Vessel Seized by France Fined €30,000
Dutch Government Collapses Amid Migration Policy Dispute
UK Commits to 3.5% GDP Defence Spending Under NATO Pressure
Germany Moves to Expedite Migrant Deportations
US Urges UK to Raise Defence Spending to 5% of GDP
Israeli Forces Intercept Gaza-Bound Aid Vessel Carrying Greta Thunberg
IMF Warns of Severe Global Trade War Impacts on Emerging Markets
Low Turnout Jeopardizes Italy's Citizenship Reform Referendum
Transatlantic Interest Rate Divergence Widens as Trump Pressures Powell
EU Lawmaker Calls for Broader Exemptions in Supply Chain Legislation
France's Defense Spending Plans Threatened by High National Debt
European Small-Cap Stocks Outperform U.S. Rivals Amid Growth Revival
Switzerland Proposes $26 Billion Capital Increase for UBS
×