Inflation Increases in Europe, Eurostat Reports

Eurostat, the official European office of statistics, announced on November 17 that inflation in the European Union has risen to its highest rate since 2014. Prices have increased by 0.5 percent in one year.

The strongest impact of inflation has been on restaurants, rents, tobacco, gas, vegetables, milk, cheese, and eggs. Increased spending in restaurants and cafes has been the main cause for this high inflation rate. Inflation growth surged sharply in October, and overall the prices of services rose 1.1 percent. Higher oil prices are predicted to raise inflation even further. Azad Zangana, a European economist in London, commented that inflation will become the biggest risk Europe will have to face.

The European Central Bank wants to keep inflation close to 2 percent. Aymeric Forest, a Schroders investment head in Europe, stated, “We are in a big trend-changing environment.” However, the Bank of England is not optimistic about future inflation. It predicts that rates will almost triple in the next year in the United Kingdom. This sharp rise in inflation is attributable to the decrease in value of the pound sterling since the Brexit referendum this past June. Inflation is not expected to return to the 2 percent target until 2020, and the economy will be 2.5 percent smaller than it was pre-referendum. The National Institute for Economic and Social Research reveals that inflation will most likely quadruple to 4 percent by the end of next year.

While the Central Bank attempts to contain inflation, it remains to be seems how much it can curb its detrimental effects on businesses across Europe.