Inflation in the eurozone hit a record 8.1% in May amid rising energy and food costs fueled in part by Russia’s war in Ukraine.
Annual inflation in the 19 countries using the euro surpassed the previous record of 7.4% reached in March and April, according to the latest figures released on Tuesday by the European Union’s statistical agency, Eurostat.
Eurozone inflation is now at its highest level since the start of keeping euro records in 1997.
Rising prices are weighing on household finances and making it more urgent for officials to act quickly to prevent further increases in the cost of living.
The war in Ukraine is a factor behind rising prices
Energy prices rose 39.2 percent, highlighting how war and the accompanying global energy crisis are costing the lives of the eurozone’s 343 million people.
“Energy inflation is likely to remain higher than previously expected” after the European Union agreed to seize most of Russia’s oil imports by the end of the year, said Andrew Kenningham, chief economist. Europe of Capital Economics.
Brent crude, the international standard, rose to $ 120 a barrel after the deal. Aiming to punish Moscow for its war with Ukraine, the embargo agreement is a double-edged sword that could also cause pain to people and businesses already struggling to cope with higher energy costs.
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Oil and natural gas prices had also risen amid fears that the war would disrupt supply to Russia, the world’s largest oil exporter. Strong global demand following the COVID-19 pandemic and a cautious approach to increasing OPEC oil cartel production have pushed up energy prices.
Russia’s neighboring countries that have wiped out Russian gas were among the hardest hit. Estonia’s inflation rate reached 20%, while in Lithuania it was 18.5% and in Latvia it reached 16.4%.
Food, alcohol and tobacco prices rose 7.5 percent in May, Eurostat said, another sign of how Russia’s war in Ukraine, a major global supplier of wheat and other agricultural products, is raising prices around the world. Prices of goods such as clothing, appliances, cars, computers and books rose 4.2%. Service prices rose 3.5%.
Inflation is also a problem in other major economies, such as Britain and the United States, where it is at its highest level in four decades.
Pressure to raise interest rates
In Poland, which does not use the euro, annual inflation in May rose to a 24-year high of 13.9%, the state statistics office said on Tuesday. Rising fuel and food prices were the main drivers in the midst of an economic boom caused by the huge influx of Ukrainian refugees contributing to consumer demand.
The latest figures add pressure on eurozone officials to raise interest rates from very low levels to curb rising prices, although this risks stifling economic recovery. The European Union earlier this month cut its economic growth forecasts for the 27-nation bloc amid the prospect of a protracted war between Russia and Ukraine and widespread power outages.
Last week, European Central Bank President Christine Lagarde gave the clearest signal so far that rates will start rising soon, and wrote in a blog that she hopes to “get out of negative interest rates by the end of the third quarter “.