Annual inflation rates in the euro area continued to accelerate in February 2022, exceeding analysts’ forecasts and reaching the highest level in the history of the euro. According to preliminary data from the European statistical office Eurostat, published on Wednesday, March 2, consumer prices rose by 5.8 percent last month compared to February 2021, after rising by 5.1 percent in January. This is the highest level since 1999, when the single European currency was introduced.
The main factor in accelerating inflation was energy prices, which jumped in February by 31.7 percent in annual terms after rising by 28.8 percent a month earlier. Relative to January, the growth of consumer prices in the euro area last month amounted to 0.9 percent, according to Eurostat.
Prices for food products, tobacco products and alcoholic beverages increased by 4.1 percent in annual terms (in January – 3.5 percent), manufactured goods rose in price by 3 percent (2.1 percent a month earlier), the cost of services increased by 2. 5 percent (2.3 percent in January). Inflation, excluding volatile factors such as energy, food and alcohol prices, accelerated to 2.7 percent in February from 2.3 percent in January.
Inflation rate nearly three times higher than ECB target
Thus, the inflation rate in the euro area is almost three times higher than the target of the European Central Bank (ECB), which considers the level of 2 percent optimal for the economy. At the same time, hopes for stabilization and a gradual slowdown in price growth in the first half of 2022 are fading against the backdrop of a Russian military invasion of Ukraine, which has exacerbated the energy crisis, threatening further acceleration in fuel prices.
Analysts at Capital Economics forecast inflation could hit 6 percent in the coming months before falling to 4 percent, “likely” by the end of the year. They warn that due to the conflict over Ukraine, which is a major exporter of wheat, not only energy, but also food will continue to rise in price.
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