According to the Consumer Price Index data, inflation in Europe stands at 8.6% as of the 12 months preceding last February. On a monthly basis, the index rose by 0.8%, both figures in line with forecasts. In an annual perspective, the peak of inflation was recorded in the months of November and December, when the figure stood at 10.6% and although the trend is positive, in terms of the core index the story is actually different. The core index for the month of February presented an annual increase of 5.6% – an all-time record in the European Unionafter the previous month the figure was 5.3%.
Since June, there has been a downward trend in oil prices, a trend which explains the relaxations in the consumer price index and which only began to be reflected in it before towards the end of 2022. Compared to the normal index, the core index neutralizes the effect of food and energy, meaning inflation in action, of most services and products, not decreases, but only continues to increase and this is the figure that should interest the decision makers at the Central Bank of Europe.
Yesterday the Central Bank of Europe raised the interest rate by 0.5%. Most analysts expected this figure – they all understood that inflation was not really calming down (and indeed the figures met the analysts’ predictions), but there was concern that the fear of the collapse of banks on the continent would lead to neutering the continuation of the central bank’s increases. In the end the bank showed us that inflation is the biggest risk for the continent, the question is whether the situation will soon force the bank to change its priorities.
The big concern comes mainly from the direction of Credit Suisse – the stock keeps plunging and the CDS spreads on the bank (cost of credit against default) reached record highs last week. Three days ago, the bank’s management postponed the publication of the annual report on the grounds that “the bank’s internal supervision of the financial reporting was not effective”. The day after the decision on the postponement, the stock continued to plunge due to the fact that the largest investor of the Saudi West Bank announced that it would not continue to inject funds into it.
It seemed that the central bank in the US managed to calm the investors down a little after the bailout of SVB and Signature Bank, but the fear still exists, a fear that could damage public trust, lead to “runs to the bank” and push the central banks even further into a corner – the problem that also Inflation does not give decision makers rest.
Comments to the article(0):
Your response has been received and will be published subject to the system policy.
Thanks.
for a new comment
Your response was not sent due to a communication problem, please try again.
Return to comment