Euro area with high inflation and weak growth

_ MIWI Institute. Brussels, 4 May 2022.

In the EU, underlying inflation has continued to strengthen. Inflation in the euro area was 8.3 percent in April 2022, the highest since March 1983.

A rapid decline in inflation in the euro area is not in sight. Energy-related inflation is currently 54.1 percent and contributes 4.6 percentage points to headline inflation.

Josef Fässler, energy market consultant and deputy chairman of the MIWI Institute, explains:

“Russia’s war against Ukraine is likely to keep energy prices high for a while longer. At the same time, the range of goods is limited by the ongoing material and delivery bottlenecks, which are exacerbated by the recent corona-related plant closures in China. The resulting increase in production costs is now increasingly being passed on to consumers by companies in the euro area.

For example, further strong price increases are looming in the food retail sector. From mid-May, probably as early as next week, I expect price jumps of 20 to 25 percent for dairy products. And that’s just the beginning, further prize rounds will follow.

This also increases the pressure on the ECB to move away from its ultra-loose monetary policy.”

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