Inflation in the euro zone shattered a new record in March, at 7.5% over one year, fueled by the war in Ukraine which is driving up energy prices, but also those of food.
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In February, the rise in prices had reached 5.9% for the 19 countries having adopted the single currency, which was already the highest level recorded by the European statistics office (Eurostat) since the start of this indicator, in January 1997.
A new all-time high has been reached every month since November, prompting governments to step in to protect consumers.
In France, a rebate of at least 15 centimes per liter of fuel came into effect on Friday, while gasoline prices passed the 2 euro per liter mark on average. Spain unveiled a 6 billion euro aid package on Wednesday.
Checks paid to employees, tax cuts, reductions in public transport or capping energy prices… European governments have multiplied announcements in recent weeks.
The rise in inflation is still fueled by soaring oil, gas and electricity prices, but even more markedly than before. Energy prices jumped 44.7% year on year in March, following +32% in February, Eurostat said.
All the components of the index are affected by an acceleration in prices, in particular food: +5%, following +4.2% in February. Industrial goods rose by 3.4% over one year in March, following 3.1% the previous month. Even the prices of services took off: +2.7% in March, once morest 2.5% in February.
Puzzle for the ECB
If the spiral is fueling a social crisis in Europe, it is also a headache for the European Central Bank (ECB), responsible for ensuring price stability.
The inflation record, well above its target of 2% per year, reinforces the pressure so that it tightens its accommodating monetary policy without delay and therefore increases its key rates.
A supporter of monetary orthodoxy, the President of the German Central Bank, Joachim Nagel, called on the institution on Friday to “not miss the opportunity to take appropriate countermeasures” to curb soaring prices.
But too strict a policy might shatter growth that has barely recovered from the consequences of the pandemic.
The war in Ukraine launched on February 24 by Russia “has accentuated inflation and reduced growth simultaneously”, underlined the President of the ECB, Christine Lagarde, on Wednesday.
On March 10, the ECB reduced its forecast for growth in gross domestic product (GDP) for this year in the euro zone, to 3.7% (compared to 4.2% previously). At the same time, it raised its inflation forecast to 5.1% (from 3.2%).
Russia is the EU’s main gas supplier and the world’s second largest oil exporter. But it is also, like Ukraine, a major agricultural power: the two countries together represent 30% of wheat exports worldwide.
Tensions and uncertainties over supply have logically caused a surge in commodity prices on world markets in recent months.
Described last year as a temporary phenomenon, inflation is set to last at least this year.
It is driven “mainly by energy and food prices”, noted Bert Colijn, analyst for ING Bank, who expects a further rise next month without excluding “a double-digit rate” . “Is the worst behind us now? We can doubt it,” he said.
