Core inflation in the 20-nation euro area registered a new record high of 5,3%, which is a revision of the initial reading of 5.2%, the European Statistical Office (Eurostat) reported on February 23.
Core inflation reflects the change in the costs of goods and services except for food and energy prices.
Consumer price inflation, which includes food and energy, eased somewhat, reaching 8.6% in January, down from 9.2% a month earlier. Over the same period, the figure decreased from 10.4% to 10% across the European Union. The highest contribution to the annual euro area inflation rate in the first month of 2023 had come from food, alcohol, and tobacco (+2.94 percentage points, pp), followed by energy (+2.17 pp), services (+1.80 pp) and non-energy industrial goods (+1.73 pp), according to Eurostat data.
Screenshot of Twitter account of Eurostat, the statistical office of the European Union.
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Preliminary annual inflation estimates stood at 8.5%, while in 2022, the European bloc recorded an annual inflation rate of 5.1%, according to the statistical office.
"The highest annual rates were recorded in Hungary (26.2%), Latvia (21.4%) and Czechia (19.1%). Compared with December, annual inflation fell in eighteen Member States and rose in nine," Eurostat added.
"The highest annual rates were recorded in Hungary (26.2%), Latvia (21.4%) and Czechia (19.1%). Compared with December, annual inflation fell in eighteen Member States and rose in nine," Eurostat added.
While suggesting that the price growth surge registered last year might have reached its peak since, the Eurostat report feeds into the concerns that underlying price pressures are far from abating. Accordingly, the data may be interpreted by the European Central Bank (ECB) as further grounds to push on with interest rate hikes.
The ECB hiked up rates by a combined 3 percentage points since July 2022. At the time, it raised the key interest rate for the first time in 11 years. Following that, the bank then raised them again in September, October and December 2022 to counteract the devaluation of the euro. The current ECB rate hike came into effect on February 8 2023, when the key rate was taken to 2.5%.
In a statement at the time, the ECB vowed it would “stay the course in raising interest rates significantly at a steady pace.”
Now, officials led by President Christine Lagarde intend to lift borrowing costs by another half-point at their March meeting, taking the key deposit rate from 2.5% to 3%
“In view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March,” Lagarde said in Strasbourg on February 15, adding that "we will then evaluate the subsequent path of our monetary policy.”
As part of the post-pandemic global economic recession, the EU has been forced to deal with a massive energy crisis and surging inflation. The situation further deteriorated in the wake of the Ukraine crisis, as self-destructive Western sanctions against Moscow backfired, leading to disruptions in supply chains and resulted in a spike in energy prices worldwide.