European inflation has reached a record high of 10.7%—a full two percentage points above what it is in the U.S.
Key Details
- Shortly after the European Central Bank announced fewer interest rate increases, European inflation reached a record high.
- Much of Europe’s current economic trouble can be traced back to the war between Russia and Ukraine, which has restricted supply chains and decreased the continent’s energy supply.
- European countries have found more expensive options for gas reserves and increased their storage, but household energy and food expenses are still high.
Why it’s news
Economists had predicted that European inflation would increase for the last month, but none had predicted such a significant increase.
As the cost of living rises in European countries, many citizens are now asking for higher pay in order to compensate for the crushing energy and grocery bills which could lead to overall higher costs.
Germany and Italy saw some of the highest inflation rates in October. Italy reached 12.8% and Germany 11.6%. Spain’s inflation rate actually fell to 7.3%.
The inflation rates warn of a potential recession in Europe. Interest rates in the eurozone rose to 1.5% on Thursday. Some investors were hoping that high interest rate hikes were going to fade away in the next several months, but continuing inflation leaves them with little hope.
European energy prices were 41.9% higher in October than the year before and food prices were 13.1% higher, according to Eurostat.
Some European governments have implemented price caps on goods and services in order to stop growing inflation. How much energy the country needs to use during the winter could play a role in how quickly inflation grows.
