Eurozone: Inflation is driven by skyrocketing food prices. This is not just a problem in the Eurozone and EU, but the whole world
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We're some time away from the next European Central Bank decision, but still inflation print temains crucial. Last week Eurozone CPI hit 6.9%, slowing down again. We asked Andrey Goilov from RoboForex for a comment. Here's what we got.
Andrey Goilov (RoboForex): Consumer prices in the Eurozone in March slowed down for the fifth month in a row. The region's annual inflation rate reached 6.9% in March, falling from the February level of 8.5%. Inflation in the Eurozone is almost three times higher than the European Central Bank's target level. At 2%, it has remained unchanged for a long time.
Prices in Austria, Slovenia, and Croatia are rising faster than in other countries, while price increases are reported to be the slowest in Spain and Luxembourg.
Inflation is driven by skyrocketing food prices. This is not just a problem in the Eurozone and EU, but the whole world. Supply chains were disrupted during the pandemic, and have not recovered yet. The world is struggling to establish new logistics, and this process needs time. Meanwhile, prices remain high. On China's side, there is a decline in the supply of components, fertilisers, and animal feeds. This also has a negative impact on prices.
For European countries in particular, the limited supply of energy carriers, mainly gas, is also a notable factor that fuels widespread price increases. And this not only affects food prices but also the cost of services.
Moreover, it should be remembered that the ECB in its attempt to beat the pandemic and its consequences and stimulate the economy, has printed huge amounts of money. And these finances were not fully supported by the supply of goods. As a result, the ECB itself created an inflation shock, which it is still unable to deal with.
