Inflation in Europe Expected to Peak Early This Year

on Feb10
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Inflation in countries using the euro, which has soared to record-setting heights in recent months, is expected to peak in the first quarter of this year, the European Commission said on Thursday, as consumers feel the bite of higher energy prices and rising costs of key goods.

Euro area inflation for the January-March period will reach 4.8 percent, up from 4.6 percent in the fourth quarter of last year, which was a record since the bloc started measuring inflation collectively in 1997, the commission said in its quarterly economic forecast. Inflation is expected to move down over the course of the year, but it won’t reach the 2 percent benchmark target set by the European Central Bank until 2023, the forecast said.

Economies will continue to grow as the impacts of the pandemic ease, by an expected 4 percent in the euro area this year, according to the forecasts, and by the end of this year will have recovered all their pandemic-era economic losses.

But inflation will outpace that average rate of economic expansion, eroding gains and the benefits that such growth would otherwise bring to Europeans.

In comments to the news media, Paolo Gentiloni, the European commissioner for the economy, said that the mix of high energy prices and persistent staff shortages caused by the coronavirus were hitting Europe’s economic recovery.

“Supply constraints have grown and energy prices have continued to be very high,” Mr. Gentiloni said. “This has contributed to dent further manufacturing production and again pushed inflation above expectations, with a negative impact on consumers’ purchasing power.”

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