Aug 31, 2021
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Prices have risen at a record in Europe

Inflation in the Eurozone has reached a ten-year high. Consumer prices rose three percent in August, CNBC reported.

In Germany, the rate was the highest since 2008 at 3.4 percent. In Spain, prices jumped 3.3 percent, and inflation in France also hit a record high in three years. The rise in prices is associated with the rise in electricity prices in Europe, as well as with supply interruptions due to local lockdowns. High inflation is also being affected by measures to support the economy, such as a private-sector bond purchase program, which provides pandemic-hit markets with easier access to money.

The next meeting of the European Central Bank (ECB) will take place on 9 September. During the meeting, the governing council will discuss the possibility of canceling a number of incentive measures that were taken during the pandemic. The proliferation of the delta strain and the resulting supply disruptions still threaten the markets, but the skyrocketing prices make one think about a return to pre-crisis policies.

The head of the central bank of France, François Villerois de Gallo, noted that he sees the possibility of a departure from the anti-crisis course. However, not everyone agrees to abandon support measures. For example, the head of the central bank of Finland, Olli Rehn, said that it would be better to be careful about removing stimulus for the economy.

The ECB’s decision may be influenced not only by high inflation rates and a desire to slow its pace, but also by the recent comment of the US Federal Reserve System (an analogue of the central bank). On August 27, Fed Chairman Jerome Powell said he admits the possibility of abandoning stimulus this year.

The gradually recovering economy of Europe also makes it possible to return to the pre-crisis policy. In the second quarter, gross domestic product (GDP) growth in the euro area was 2 percent. Jobs also began to recover, with Eurostat reporting that employment rose 0.5 percent in the second quarter.

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