Eurozone inflation hits highest rate on record at 9.1% as Nord Stream and Gazprom halt gas deliveries

The rate was higher than economists suspected and most of the increase was driven by rising energy prices in Europe.

Europe’s inflation continues to rise as region faces energy crisis

Currently, Europe is suffering from the highest rate of inflation the Eurozone has seen in nearly 50 years, with every member of the European Union seeing consumer prices soar. Just recently, Reuters interviewed a number of economists, and the data released by Eurostat is more important than the economists’ forecasts.

Statistics show that energy prices saw the largest increase in inflation, reaching 38.3 percent, while items such as food jumped 10.6 percent. In addition, non-energy industrial goods were up 5 percent from the value of these goods measured last year. With respect to energy prices, it appears that the rise in energy prices will continue. The energy crisis could worsen due to the war in Ukraine.

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As of today and until September 2, 2022, the Nord Stream 1 pipeline is undergoing “maintenance.” This maintenance is causing people to worry that Russian leaders will extend the closure of the pair of offshore pipelines that connect Russian gas supplies to Germany. Russian Federation already cut flows by 40 percent in June and reduced them by another 20 percent in July.

In addition, Russian gas giant Gazprom said Tuesday it would stop supplying gas to French industrial energy group Engie. Some believe that the European Central Bank (ECB) needs to raise the benchmark interest rate, as the Federal Reserve recently did to contain the steep rise in inflation.

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The ECB will meet on September 8 and reports indicate that economists are betting that the ECB will raise the benchmark rate by 75 basis points (bps). Speaking to The StreetING’s chief economist Bert Colijn said: the ECB needs to slow down, but to what extent is the question now.

Specific European issues continue to push inflation higher – Gas supply crisis and droughts add to persistent supply pressures on inflation right now“, said Bert Colijn. “With the economy slowing rapidly – and perhaps already contracting at this point – the question is how much the ECB should hit the brakes“, added the ING economist.

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