Europe’s Record Price Hikes Point To Global Inflation

The rising rate of inflation is not a situation that is unique to the United States, as Joe Biden pointed out.

Prices in Europe climbed at a record annual pace of 8.6 percent in June, according to economic data published on Friday. This rate is the same as the one recorded in the United States during the previous month. The announcement comes at a time when the European Central Bank, which has trailed behind the Federal Reserve in terms of tightening monetary policy, is prepared to hike interest rates.

The number increased from May’s 8.1 percent and is likely to add to the continent’s troubles as Europe faces significant interruption to its energy supplies as a result of Russia’s invasion of Ukraine in February. Despite the fact that the total rate was only 8.6 percent, both France and Spain had inflation rates that reached 10 percent.

Late in July, the European Central Bank (ECB) will have a meeting to announce a rate hike, and the central bank has also indicated that it is likely to raise rates once more in September. Following the increase of 75 basis points that took place in June, the Federal Reserve is scheduled to convene in the middle of this month, and it is anticipated that they will decide to raise interest rates by either 50 or 75 basis points.

Earlier this week, ECB President Christine Lagarde made a commitment to combating inflation when speaking at a conference in Portugal.

“If the inflation outlook does not improve, we will have sufficient information to move faster,” Lagarde said.

The chairman of the Federal Reserve, Jerome Powell, has likewise taken a hawkish tone, promising an “unconditional” commitment to reining in runaway inflation.

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In response to criticism from Republicans and others that both Powell and Biden were late to solve the problem and spent the majority of 2021 treating it as “transitory,” Powell and Biden frequently point to the global nature of inflation as an explanation.

It is widely acknowledged among economists that disruptions to global supply networks, in conjunction with federal stimulus initiatives dating back to 2020, contributed to the rise in overall prices. But there is also a popular perception that the Federal Reserve waited too long to change course from a highly accommodating monetary policy that fueled booms in the stock markets and the real estate sector.

Both the bond and stock markets have experienced significant declines since the Federal Reserve announced its plans to raise interest rates earlier this year, with the stock market experiencing its worst first half of the year in decades. Additionally, the housing market has experienced a significant slowdown.

On Thursday, an inflation measure that Powell and others at the Fed closely monitor showed a slight moderation in the rate of price growth. The core personal consumption expenditures index came in at a 4.7 percent annual growth rate for June, down from 4.9 percent a month earlier. This was a decrease from the previous month’s reading of 4.9 percent.

Luke Tilley, the chief economist at Wilmington Trust, stated on Thursday that “This morning’s report was much tamer than the CPI was.” He was referring to the consumer price index. “CPI overstates inflation relative to the PCE.” Critics of Biden, who spoke on Thursday during a news conference at the NATO summit in Madrid, are unlikely to find much solace in this fact, though.

“The bottom line is, ultimately the reason why gas prices are up is because of Russia. Russia, Russia, Russia Russia. the reason why the food crisis exists is because of Russia,” the president stated. This prompted Republicans, especially the representative for New York from the Republican party, Elise Stefanik, to respond angrily. “Is your family traveling for the Fourth of July weekend? The average price for a gallon of gas in New York is $4.93 thanks to Joe Biden,” the lawmaker wrote in a tweet.

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