Euro Zone Inflation Rate Hits A Record 4.9%

Inflation across Europe has risen to a record high in November, prompting calls for the European Central Bank (ECB) to raise interest rates.

Headline inflation reached 4.9% for the month compared to November 2020. This was above a consensus forecast of 4.5% inflation and was higher than October’s 4.1% reading.

The November inflation rate is the highest on record in the 25 years that the data has been compiled on a monthly basis.

The latest inflation data comes as policymakers are waiting for more data on a new COVID-19 variant called Omicron that was reported for the first time last week in South Africa.

The travel restrictions implemented in the wake of the new variant are raising concerns about how economies will cope. Experts argue that societies are better equipped to deal with the virus now compared to the first lockdowns, but market players have been on edge with the prospect of further restrictions.

Nonetheless, consumer prices rose once again in the Euro zone due largely to higher energy costs and supply chain issues.

In Germany, Europe’s biggest economy, the inflation rate hit a 29-year high in November. Prices were up by 6% from a year ago, as measured by the harmonized index of consumer prices.

The trend is the same in France, where the inflation rate reached 3.4% in November, the highest reading since 2008.

The question going forward is how the ECB will manage high inflation with uncertainty over the pandemic.

The ECB said last week it still plans to end its emergency bond purchase program in March 2022. However, economists want to know how the central bank will be adjusting its other tools, namely interest rates that are currently at historic lows.