- Inflation in Europe Rises to 3%
- Holzmann Said that the Time has Come to Consider How to Reduce Pandemic Asset Purchase Programs
- Australia’s Economic Growth is Exceeding Predictions
Inflation in Europe Rises to 3%
In August, inflation in the eurozone increased again, a little over a week before a keenly watched European Central Bank meeting. According to preliminary estimates released Tuesday, consumer prices grew by 3% from a year ago this month, following a 2.2 percent gain in July. The central bank has upped its inflation prediction several times this year, only for actual statistics to exceed expectations, and price rise currently appears to peak only in November. According to Eurostat, the EU’s statistics department, the increase was fueled by energy costs, but food prices also rose sharply, and there were also particularly substantial increases in the prices of industrial goods.
If the August figure is verified in the coming weeks, it will be the highest inflation rate in ten years. This comes after Germany announced on Monday that consumer prices in August reached their highest level since 2008, with a headline inflation rate of 3.4 percent. On Tuesday, France announced its highest inflation rate in over three years.
“The effects of re-opening and supply problems could intensify in the next few months. But we suspect that they will begin to fade next year as global consumption and trade patterns return to something like their pre-pandemic norms,” Capital Economics said. “We think the headline rate will drop to about 2% in January and trend down throughout 2022 to end next year at around 1%,” it added.
How to Reduce Pandemic Asset Purchase Programs
Robert Holzmann, Member of the European Central Bank Governing Council, said that the issue of how to withdraw the monetary support provided during the coronavirus epidemic should be started to be discussed at the next meeting.
“We are in a situation where we have to think about how to reduce the special programs implemented during the epidemic period,” said Holzmann, and stated that at the September meeting, there should be a discussion about closing the epidemic period and how to switch to the inflation period.
Holzmann stated that the path related to asset purchases should be separated from the course related to future interest rates. He also stated that the euro-area economy is recovering largely as expected, allowing policymakers to contemplate winding down bond purchases under the emergency program. Industrial production has been affected by supply-chain constraints, but this is unlikely to derail the recovery. Stating that supply problems pose a problem but are temporary, Holzmann said, “This reduces some of the production, but does not completely affect the production capacity.”
Australia’s Economic Growth is Exceeding Predictions
The Australian economy grew faster than expected in the second quarter of the year as households used their savings for consumption.
According to data from the Australian Statistics Office, the country’s gross domestic product grew by 0.7 percent in the second quarter compared to the previous quarter. Economists had expected growth to be 0.4 percent. The economy expanded by 1.9 percent in the previous quarter, with an upwardly revised figure. Australia grew by 9.6 percent compared to the same period last year, when it contracted sharply due to Covid. The expectation for this data was determined as 9.1 percent. However, the strong recovery in the tenth week of quarantine in Sydney under the threat of emerging variant delta. The epidemic is spreading along the east coast of the country, similar to other parts of Asia.
According to experts, Australia’s recovery in Q3 will likely be slower. This reflects reduced financial support and the gradual loosening of restrictions as the economy adapts to living with the virus.
The 1.2 percent gain in wages due to the increase in employment and the number of hours worked also supported the increase in expenditures.