Inflation in Europe is through the roof!Eurocrats scared?5.1% inflation is a record!Rate hikes coming?
Senior EU officials are terrified that inflation in the euro zone is not only out of control, it is off the charts.Why are top EU officials freaking out?Eu officials and markets had expected the CPI to fall to 4.4% in January, but the latest January inflation figures showed that the euro-area CPI accelerated from 5% in December to 5.1%, a record high.The CPI in the EU was up 5.3% year on year (choice). ECB officials were upbeat.For this time, the ECB and the Federal Reserve held the same view on global inflation: “Inflation transitory”.In other words, the great global inflation starting in 2021 is regarded by both European and American countries as a “temporary inflation”.But as THE US CPI continues to climb to record levels, Powell’s face is thumping with the inflation report.Meanwhile, ECB officials have been laughing at the Fed’s jokes.After all, THE U.S. CPI is already at 7.1%, a 40-year high, and is expected to hit another record high of 7.3% in January.In Europe, it’s only 4%, not by a hair’s breadth.As a result, under the strong inflationary pressure and livelihood problems, the Federal Reserve has now completely abandoned the temporary inflation theory, and turned to raising interest rates and shrinking the balance sheet in a targeted way to curb inflation.But what about the EU side?Inflation is not high because the economic base is relatively good and there is less liquidity.But in recent months, rising energy prices have stoked inflation, so Europe is in the same trouble as the United States.It can be said that the European Union and the United States, on behalf of capitalism, have fallen into the deep inflation vortex, and today we also talk in detail about inflation and interest rate hikes in the European Union.Eurocrats are no fools. In their view, Europe’s inflation is different from America’s. Low wages, less deregulation, and a large base effect will gradually tame the inflation problem, not as well as China’s, but not by much.But January’s inflation figures (CPI5.1%) shatter that view.So what is the key to European inflation?The first is omicron.In the hardest-hit parts of Europe, economic activity is depressed, consumer mobility is low and industrial prices in Germany are soaring, according to an EU report.In the context of rising industrial prices, supply chain problems caused by the epidemic have curbed the free flow of goods, making it difficult for goods to circulate due to the shortage of truck drivers in Europe.So supply chain bottlenecks caused by the pandemic are exacerbating the inflation problem.The second is the rising price of natural gas. Europe is in the midst of an energy crisis, and the price of natural gas has repeatedly hit new highs. The price of natural gas is about 4.6 times higher than before.In Europe, electricity bills have risen by a dozen or even dozens of times.This has put enormous cost pressure on the economy and industrial production.European gas prices (data) from a choice now, Europe’s heavily dependent on Russian natural gas supply, once Russia natural gas supplies, so it was big, the European economy is likely to collapse because of a lack of natural gas, and even, extraordinary inflation, stock market crash was nothing important.What’s more, there doesn’t seem to be much the EU’s best ally, the United States, can do other than rely on Russia, because the United States, one of the world’s largest natural gas producers, is already exporting a record variety of natural gas in 2021, and even if it continues to squeeze the United States dry, it is unlikely to produce much more.The third is the stimulus of geopolitical crisis.Putin flew back to Moscow after attending the Winter Olympics, and bloomberg’s announcement that “Russia has invaded Ukraine” sparked unrest.Fortunately, Bloomberg immediately retracted the story, proving it was a false alarm, but the smell of gunpowder behind the story is already visible from our screens.If there is a war between Ukraine and Russia, it will be a European civil war and a war between NATO and Russia.As a consequence of the war, both sides will suffer.Remember, this is a war between the EU and Russia, not a minor military skirmish, which would have a huge impact on global financial and energy markets.Once conflict breaks out, any price increase is trivial. Winning or losing is what matters.The EU is going to raise interest rates?Europe is now moving the same way that the United States did, by tapering asset purchases.In Europe, with ECB President Christine Lagarde reiterating the tapering of asset purchases, markets are betting that Europe will start tightening monetary policy and raise interest rates in March.The range of rate hikes is tentatively set at 40-50 basis points. If the Fed raises rates more aggressively, then The European side may also go further and continue to increase the intensity and frequency of rate hikes.The euro zone’s rate hike comes after The UK, which has already left the European Union, started raising interest rates.On December 16 last year, the UK got rid of zero interest rates by raising interest rates by 25 basis points to 0.25%, and on February 3 it raised interest rates by another 25 basis points to 0.5%, also because of high inflation.According to the data, inflation in the UK is already running at 5.4%, and 6% or even 7% is likely to be achieved if strong measures are not taken.The European Central Bank (ECB) is now following the Us Federal Reserve’s policy path, moving from a rigid “no rate hike” to “temporary inflation” to tapering asset purchases and raising rates by 50 basis points.When the Federal Reserve raises interest rates this year, Europe will continue to raise interest rates to control inflation if it does not want to follow America’s lead.In fact, the attitudes and thoughts of European officials are similar to those of Fed officials, who are used to the market, but do not understand that we are also in the “historic moment.”No one can completely avoid global inflation. What we need to do is to prepare for it and find ourselves no longer swimming naked after the tide has gone out.——————– to find the truth behind the hot topics, welcome to forward, like, comment.Figure source from the network, delete.