What's going on?
Fresh data out on Tuesday showed inflation hit a record high in Europe last month, and that’s before the region’s been properly reacquainted with a blast from the past…
What does this mean?
Europe just can’t catch a break: consumer prices climbed by 4.9% in November compared to the same time last year – up from 4.1% the month before and the biggest jump since the euro was introduced. Ever-rising energy prices – which were up 27% – didn’t help, but there’s more at play here: the mix of strong demand and rife shortages meant prices of things like services, raw materials, and machinery were around 2% higher. That might explain why the core inflation measure – which strips out unstable costs like energy and food – also notched a record high.
Why should I care?
The bigger picture: Inflation is still temporary. Ish.
This is the fifth time eurozone inflation has climbed since June. And while the European Central Bank (ECB) maintains that it’s all temporary, some ECB members did admit that high prices might stick around longer than they expected. That could force the central bank to start removing its economic support sooner than expected to keep price rises in check. But the ECB had better be careful: the restrictions some countries are introducing in response to the new Omicron variant could knock the economic recovery even before the central bank withdraws its support.
Zooming out: The Fed gets déjà vu.
Speaking of which, the US Federal Reserve said earlier in the week that the new variant poses a real threat to its key mandates, namely keeping US employment full and inflation low and stable. After all, workers might start to give the 9-to-5 a miss again if they’re worried about the virus, which could make supply chain disruptions even worse and push inflation in the country even higher.