Women wearing face masks pose for a photo in front of the Eiffel Tower.
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Euro zone inflation rate hits new record high in December, raising questions about European Central Bankpolicy of.
Preliminary data showed on Friday that headline inflation was 5% for the month, compared with the same month last year. This represents the highest ever recorded and follows November’s all-time high of 4.9%.
Inflation is in the spotlight after consecutive gains in recent months, with money managers debating whether the European Central Bank should take a more aggressive stance against whether prices go up or not.
The central bank said last month that it would cut its monthly asset purchases, but vowed to continue unprecedented levels of stimulus in 2022.
“The currency is still needed for inflation to stabilize at the 2% inflation target over the medium term,” the ECB said at the time.
Its forecast, updated in December, puts inflationary at 1.8% in both 2023 and 2024. However, it expects the rate to beat the bank’s target in 2022, which will be at 3.2%.
Economists say the pandemic and inflation are among the biggest risks to economic activity in 2022.
“If inflation continues to rise and surprises continue to rise, central banks may be forced to brake hard,” analysts at Berenberg said Friday on the global outlook for the new year.
They added that the ECB could prepare the ground for its first bull run in the spring of 2023.
