Economists quickly come up with advice when European inflation reaches 5%

Economists quickly come up with advice when European inflation reaches 5%

BRUSSELS, Belgium: In December, the inflation rate in the euro area reached a new record, raising further questions about the European Central Bank’s policy.

Preliminary statistics from January 7 showed that inflation for December reached five percent, compared to the same month last year, the highest ever ever and follows November’s record high of 4.9 percent, mainly caused by higher energy prices.

With questions raised as to whether the European Central Bank should be more proactive in combating rising prices, inflation has been in the spotlight following successive increases in recent months.

Last month, the European Central Bank said it would reduce its monthly asset purchases, but stressed that it will continue to provide incentives in 2022.

“Monetary adjustments are still needed to stabilize inflation at the 2% inflation target over the medium term,” the ECB said.

Its forecasts, updated in December, placed inflation at 1.8 percent in both 2023 and 2024, but it expects the rate to exceed the 2022 target of 3.2 percent.

Pandemics and inflation are among the most serious economic risks in 2022, economists claim.

At the same time, analysts at Berenberg said that if inflation continues to rise, central banks may be forced to step in quickly, adding that the European Central Bank can prepare the ground for a first rise in the spring of 2023.





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