Inflation fed by high oil and gas prices hit record levels in Europe for the third month in a row, extending pain for consumers and sharpening questions about future moves by the European Central Bank.
The 19 countries that use the euro currency saw consumer prices increase by an annual 5.1% in January, the European Union statistics agency Eurostat reported Wednesday. The figure broke a record of 5% in December and 4.9% in November and was the highest since recordkeeping started in 1997, The Associated Press said.
Once again, soaring energy prices played a major role. Oil prices have risen as the global economy recovers from the worst of COVID-19 restrictions, while natural gas prices have surged in Europe because of depleted winter reserves, lower supplies from Russia and fears of a renewed military move by Moscow against Ukraine.
High inflation levels have increased the focus on Thursday’s policy meeting at the European Central Bank. Bank President Christine Lagarde has said much of the inflation is tied to temporary factors that should eventually fade.
As a result, she has said it’s “very unlikely” that the bank will raise interest rates this year, the typical antidote used by central banks against excessive inflation. Analysts say markets will be watching to see if there is any shift in the bank’s outlook.
The bank thinks inflation will decline sharply this year and fall to 1.8% in 2023 and 2024.
Temporary factors include bottlenecks in deliveries of parts and raw materials that limit supplies of goods and drive up prices as well as comparisons to extremely low energy prices during the worst of the pandemic slowdowns. Those comparisons will drop out of inflation statistics as time passes.
The bank’s stance contrasts sharply with that of the US Federal Reserve, which has signaled it could begin a series of rate increases as early as March amid inflation that is at a 40-year high.
