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Inflation across eurozone hits a record high of 4.9%

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The European Union’s statistics agency, Eurostat announced on Tuesday that the eurozone‘s inflation rate has risen to a record high in November to 4.9%, prompting further questions about what the European Central Bank will do next with its monetary policy, according to CNBC. 

Eurostat indicated that it is by far the highest level in the 25 years since the figure has been compiled, up from 4.1% a month earlier and well ahead of expectations for 4.5%.

Higher energy prices contributed the most to the latest inflation reading. According to  Eurostat, energy is on track for its highest annual price rise in November at 27.4% from 23.7% in October.

The data comes at a time when policymakers are waiting for more data on a new Covid-19 variant, Omicron, which was reported for the first time last week in southern Africa. The travel restrictions implemented in the wake of the new variant are raising concerns about how economies could suffer.
 

The eurozone, which is made up of 19 economies is enduring big price hikes as a result of the economic recovery from the coronavirus pandemic and blockages in supply chains.

Although inflation is now more than twice the European Central Bank‘s (EBC) 2% target, it is unlikely to trigger any policy action, even if the data make for uncomfortable reading and could trigger political pressure on the ECB to rein in price growth, according to Reuters.

The ECB has long argued that the inflation surge is temporary, caused by a range of one-off factors, and will subside over time so policy action now would be counterproductive as it would thwart economic growth just when inflation eases on its own.

The ECB will next meet on December 16, when it is almost certain to end a 1.85 trillion euro emergency bond purchase scheme but will likely ramp up other measures to make up for the lost stimulus.