In November, inflation was 4.9 percent in the euro area and 5.2 percent across the Union. A year earlier, in December 2020, the euro area was still in deflation. That was minus 0.3 percent. The inflation rate in the EU a year ago was 0.3 percent.
Compared to November, prices in the euro area increased by 0.4 percent. In the EU, month-on-month growth is 0.5 percent.
Malta had the lowest inflation rate in December, at 2.6 percent, followed by Portugal (2.8 percent) and Finland (3.2 percent). By contrast, the highest inflation rates were in Estonia (12.0 percent), Lithuania (10.7 percent) and Poland (8.0 percent). Compared with November, the annual inflation rate decreased in seven Member States, remained unchanged in two and increased in eighteen.
In December, energy prices contributed the most to the rise in inflation in the euro area, accounting for 2.46 percentage points. This was followed by services (+1.02 points), non-energy industrial goods (+0.78 points) and food, alcohol and tobacco (+0.71 points).
The European Central Bank (ECB) does not yet intend to address the rise in consumer prices by raising interest rates, which are zero in the euro area, as it considers inflation to be temporary.
However, according to Tomáš Volf from Ciftin, it is possible that the ECB will have to reconsider this position later this year. “Price developments have changed a lot in recent months, and verbal interventions that the ECB is ready to fight inflation very hard when the time is right are unlikely to be enough,” Volf said, noting that the US Fed had already done the same. which will go up in March.
ECB chief: Inflation will ease
But according to ECB President Christine Lagarde, there is no need to act so vigorously. Inflation will gradually decline this year, as the main reasons contributing to rising prices, ie expensive energy and supply chain problems, will ease.
In addition, the economic situation in the eurozone and the United States is different, Lagarde said. “The cycle of economic recovery in the United States is a little further than in Europe. That’s why we have good reasons not to act as quickly and as vigorously as we can expect from the Fed now, “she said.
She also pointed out that the inflation rate is also higher in the USA than in Europe. In the US, it rose to seven percent in December, the highest in almost 40 years. In the euro area, it was five percent in November, the highest level in 20 years or since the introduction of the euro.