We have launched our mobile app, get it now. Call : 9354229384, 9354252518, 9999830584.  

Current Affairs

Record inflation in Eurozone

Date: 11 January 2022 Tags: World Economy

Issue

The surging food and energy cost has resulted in highest level of inflation in the 19 countries that use the euro currency.

 

Background

Consumer prices in European Union economies rose by 5 per cent in December compared with the previous year. The eurozone economies include major countries like France and Germany.

 

Details

  • Energy prices have jumped by over 26 per cent over the past year, which however is lower than previous month.

  • Food prices have seen an increase to 3.2 per cent, from November’s 2.2 per cent rate. The price of goods rose at a rate of 2.9 per cent.

  • Price increase in services eased to 2.4 per cent. This was because rise on Omicron variant resulted in reduced demand for holiday travel. 

 

Importance

  • The latest numbers mark the highest level of inflation since recordkeeping for the euro currency began in 1997.

  • The numbers indicate that food at store to shopping trips and fuel are costing more as demand for goods grows after economic recovery.

  • European Central Bank is under pressure to act on inflation since it has kept interest rates ultra-low to stimulate an economy.

 

Global inflation

  • Inflation has grown globally including in the US, the fastest in last 39 years. Many previously stable economies such as Turkey have grappled to control the rate, which has soared to 36 percent.

  • The UK has also witnessed faster pace of inflation. The rate in Brazil has accelerated to more than 10 percent, the highest in last 10 years.

 

Global response

  • Economies across the globe are raising interest rates to fight soaring inflation. This has been necessitated even as Omicron variant has been threatening economic slowdown.

  • The Bank of England last month raised its interest rates, becoming the first country in advanced economy to raise rates after pandemic began.

  • The US Fed has indicated that it will resort to tighter fiscal policies and unwind its bond buying programme to counter inflation.