Rising eurozone inflation puts pressure on ECB

Economists are predicting a peak of 3.5% in the coming months

Inflation across the eurozone has reached its highest point in nearly ten years, ramping up pressure on the European Central Bank to decrease the rate of its bond buying programme.

On the back of its recovery, August saw the consumer price index in the eurozone rise by 3% compared to a year ago, up from 2.2% in July. The increase surpassed the expectations of the majority of economists.

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The last time the index of consumer prices rose so quickly was November 2011, shortly after the central bank had raised interest rates for the bloc.

Prices have shot up since the eurozone emerged from lockdowns.

Increased energy prices and supply bottlenecks are causing upward pressure, in addition to weak figures from the year before making the rise more stark.

There is likely to be a continuation of price rises in the coming months, as economists are predicting a peak of 3.5%.

“The effects of re-opening and supply problems could intensify in the next few months. But we suspect that they will begin to fade next year as global consumption and trade patterns return to something like their pre-pandemic norms,” Capital Economics said in a note.

“We think the headline rate will drop to about 2% in January and trend down throughout 2022 to end next year at around 1%,” it added.

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