Eurozone inflation accelerated to another all-time high as Russia’s invasion of Ukraine roiled global supply chains and provided a fresh driver for already-soaring energy costs.
March consumer prices surged 7.5% from a year ago, up from 5.9% in February and more than the 6.7% median estimate in a Bloomberg survey. Showing the increasingly broad nature of the advance, a core gauge excluding volatile components also hit a new record.
Friday’s data follows inflation overshoots this week from Spain and Germany that prompted investors to bring forward bets on when the European Central Bank (ECB) will end almost eight years of negative interest rates.
Under pressure to act as households across the 19-member currency bloc are squeezed, the ECB this month announced an accelerated exit from asset purchases, with some policymakers calling for one or more rate hikes by year-end.
Vice-president Luis de Guindos hopes price gains that are now more than three times the 2% target will peak in the next month or two. But that’s far from certain: President Vladimir Putin threatened on Thursday that he’d halt natural gas supplies to countries unwilling to pay for them in roubles — jarring energy markets again.
In a release on Friday, S&P Global said its purchasing managers’ index showed input-price inflation in the euro area hit a four-month high in March, stoked by higher commodity, fuel and energy costs.
“The question is whether the worst is behind us now and that seems doubtful,” said Bert Colijn, senior eurozone economist at ING. “From here on there are multiple factors stemming from the war that are set to keep upward pressure on prices.”
Economic expansion, which has been underpinned by the loosening of pandemic restrictions, is also in jeopardy as rising prices curb consumption, and the war crushes confidence and investment.
Germany could face a recession if Russia turns off the gas taps, advisers to Chancellor Olaf Scholz warned this week. Governments are paring back growth outlooks, and the heightened uncertainty has led some companies to scrap earnings guidance.
Bloomberg
