Eurozone inflation exceeds 10.7% amid slowing economic growth

The inflationary pressures facing most of the world are having a much more unexpected effect in the eurozone. According to data released Monday by the European Statistical Office, headline inflation in the eurozone reached 10.7 percent, the highest rate ever recorded since the 19-member body was created.

Inflation within the Eurozone is a significant indication of the high cost of living that many residents are facing right now. The situation in the region has even been exacerbated by the ongoing war between Russia and Ukraine, a conflict that has limited the flow of hydrocarbons that can better serve homes and industries.

Published data showed that key aspects of consumer goods experienced massive inflation above the overall figure. Energy costs climbed 41.9 percent, up from 40.7 percent in September, and the cost of other essentials, including food, alcohol, and tobacco, also registered inflation of more than 13 percent, up from 11.8 percent in August.

The inflation data released by the Eurozone came after each country reported its own inflation rate for September. According to the data released, Italy’s inflation climbed 12.8%, Germany’s 11.6% and France’s 7.1%. Although these figures are very worrying for the individual countries, member states such as Latvia, Lithuania and Estonia were in a more difficult situation, with inflation exceeding 20% respectively.

Potential cure for inflation in the eurozone

Inflation in the Eurozone is not a new experience, as other countries are also facing this problem. The European Central Bank (ECB), like everyone else, is committed to fighting this inflation until it reaches the 2% target again.

One of its main models for fighting inflation is to raise interest rates, which it has done twice so far, raising rates by 75 basis points.

With the decision to raise interest rates in the near future already confirmed, the ECB highlighted the “substantial progress” made so far in normalizing rates in the region, but it “plans to raise interest rates further to ensure a timely return of inflation to its medium-term inflation target of 2 percent.”

Fighting inflation can be very tricky. While the upward brakes are intended, among other things, to slow inflation, they can also push the economy into recession and, as such, cause policymakers to be cautious about raising rates.

The U.S. Federal Reserve is currently facing this dilemma, and industry experts expect a slowdown in the 75 basis point hikes it has been announcing for some time now. With the U.S. Fed set to meet tomorrow, November 1, all eyes will be on the central bank in what could set a precedent for all other global central banks.