Eurozone Experiences Lowest Inflation: In September, when inflation in the Eurozone fell to its lowest level in two years, the European Central Bank‘s steady rise in interest rates paid off. But this deliberate attempt is hurting the economy’s growth more and more.
The prices of goods and services in the 20 countries that use the euro as their shared currency increased by only 4.3% in the last month. Eurostat’s quickly released flash report on Friday showed a slowdown from the previous month’s growth rate of 5.2% and the slowest growth rate since October 2021.
When you look at the details, you will see that the measures of inflation that the ECB keeps a close eye on because they show underlying trends had a sharp drop. These measurements do not consider how food, energy, booze, and cigarettes can change over time. From 5.3%, the index dropped to 4.5%, the most significant drop since the summer of 2020.
These signs should make the ECB even more sure that it has raised interest rates to a level that will bring inflation down and make it possible to hit the 2% goal by the end of 2025. This story takes place against a past math mistake that left the ECB unprepared for a rise in inflation that started in 2021, which was a rough year.
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During the tumultuous fall of the past, prices went up for a short time and almost hit double digits. Several things came together to cause this situation, such as rising energy costs, problems with the supply chain after the pandemic, and a tendency to be generous with money.
In response, the ECB did something very clever: it raised its primary interest rate to a never-before-seen high of 4%. This crazy rise happened in just one year, and the previous low point of -0.5% was gone. The money taps were suddenly turned off, ending a decade-long drive to get inflation going again by making policy very flexible.
All of the groups’ growth rates slowed down in September, which shows how significant the drop in inflation was. Notably, energy prices have gone down almost without stopping for the fifth month in a row.
But this tightening cycle, which has been going on for almost 25 years and is the worst in ECB history, is starting to show its effects. There are more signs that the Eurozone could fall into a deep slump. Figures released that same Friday showed that German retail sales fell in August, which was a surprise. So, the biggest economy in the Eurozone is now dangerously close to going into a second slump this year.
Our Reader’s Queries
Which country in Europe has the lowest inflation rate?
Eurostat, the statistical office of the European Union, has reported that the annual inflation rate for the EU in October 2023 was 3.6%, a decrease from September’s rate of 4.9%. This is a significant drop from the 11.5% rate recorded a year earlier. The countries with the lowest annual rates were Belgium (-1.7%), the Netherlands (-1.0%), and Denmark (-0.4%).
Why is European inflation so low?
Eurozone inflation hit a new two-year low in November, dropping faster than anticipated due to high interest rates and efforts by European countries to reduce energy and food prices. This paves the way for the European Central Bank to maintain interest rates at its upcoming meeting.
Who was hit hardest by Europe’s inflation?
The current surge in prices within the euro zone highlights the persistent challenge of reconciling the needs of different age groups in EU countries.
What is the inflation level in eurozone?
The latest estimates reveal that inflation in the Eurozone stood at 2.9% in December, casting doubts on the possibility of rate cuts by the European Central Bank (ECB). Eurostat’s flash estimate indicates that the annual inflation rate in the Eurozone was 2.9% in December, up from 2.4% in November. This development is likely to impact the ECB’s decision-making process in the near future.