Fundamental analysis

Eurozone inflation has rewritten a double-digit high again


Inflation in the eurozone has risen to a new record high, while the bloc’s economy has lost momentum, heightening fears that a recession is now almost inevitable.

Consumer prices in October jumped by 10.7% compared to last year, far exceeding the average estimate of 10.3%.

Meanwhile, output in the third quarter slowed to 0.2% compared to the previous three months – more than analysts had predicted, but much less than the 0.8% growth recorded in the period from April to June. As the energy crisis continues to devastate businesses and households, growth is expected to slow during the winter.

European bonds remained lower after the release of the data, the yield of 10-year German bonds rose by four basis points and amounted to 2.15%. The euro fell 0.3% to $0.9937.

Last week there was good news from Germany, the bloc’s largest economy, which refuted forecasts of a contraction, showing growth that was faster than in the previous three months.


But it is still believed that this will lead Europe to a recession in the coming quarters, and a sharp increase in interest rates by the European Central Bank will worsen the situation.

“Recession risks are spreading,” Spanish central bank governor Pablo Hernandez De Cos said at an event Monday in Turkey. “Decisive actions on our part in the current conditions will support medium-term growth, reducing inflationary pressure and avoiding weakening inflation expectations.”

A sharp slowdown in growth in the third quarter was already evident in Spain and France, as the boom in the tourism and recreation industry after quarantine came to naught. The data came a day after the ECB doubled borrowing costs to the highest level in more than a decade, and officials later backed further serious steps to bring prices back to the 2% target.

The inflation data released on Monday was not encouraging. While the main indicators were still determined by energy and food costs, the baseline indicator, which excludes these two elements, also rose to a record high. Italy on Friday showed a record figure, which turned out to be much higher than analysts expected.

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