Frankfurt, 2 April 2022 (TDI): The European Central bank (ECB) reports that inflation in the Eurozone has hit an all-time high amidst the ongoing Russia Ukraine conflict.
The rise in the price of fuel has caused inflation to go up in the entire bloc. Headline inflation reached a staggering 7.5% in March. In February it stood at 5.9%.
The 1.6% increase comes mainly from rising fuel costs associated with the Russia Ukraine crisis. With the cost of living hitting an all-time high critics question how the European Central bank will stabilize rising costs.
Europe has imposed stringent economic sanctions on Russia, ranging from stopping the import of Russian oil to blocking the sale of luxury goods in the country and closing down several businesses in the country.
Some economists say the Euro Zone will enter a recession this year but many European officials refute this claim. Italy’s Prime Minister, Mario Draghi said that even though there is significant economic damage from the crisis, there won’t be a recession.
The President of the European Central Bank, Christine Lagarde said there are three main factors that could further cause inflation to rise.
“Energy prices are expected to stay higher for longer, pressure on food inflation is likely to increase, and global manufacturing bottlenecks are likely to persist in certain sectors.” -Christine Lagarde, President of the European Central Bank.
She also added that households are becoming more and more pessimistic and as a result could cut back on spending business will suffer as a result of this, and wages will most likely suffer as well.
I spoke with Paris Potamitis from Cyprus’s national broadcaster @cybc_com_cy about the atrocious war in Ukraine and the economic challenges it poses for Europe.
— Christine Lagarde (@Lagarde) March 30, 2022
With rising interest rates many experts believe the bank will start raising interest rates very soon, Jack Allen-Reynolds a senior economist at Capital economics says that three 25 basis points rate hikes are expected for this year.