Inflation in the euro zone remains well above the ECB’s target, while energy and food prices are soaring.
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Eurozone inflation hit a record high for the sixth month in a row, raising new questions about the reaction of the European Central Bank.
Headline inflation in the 19-member region hit 7.5% in April, according to preliminary estimates from the European Statistical Office. In March, the figure was 7.4%.
European Central Bank Vice President Luis de Guindos on Thursday tried to reassure lawmakers about rising prices, saying the euro zone was close to peaking inflation. The central bank sees price pressures easing in the second half of this year, although energy costs are expected to keep inflation relatively high.
The latest inflation reading comes amid concerns over the ongoing war in Ukraine and its subsequent impact on Europe’s energy supply – and how it could affect the region’s economy.
Earlier this week, Russian energy company Gazprom halted gas flows to two EU countries for failing to pay for the product in roubles. The move raised fears that other countries could also be cut off.
Analysts at Gavekal, a financial research firm, said if Gazprom were to cut deliveries to Germany as well, “the economic effects would be catastrophic”.
Meanwhile, in Italy, central bank estimates point to a recession this year if Russia cuts all sound the energy supply of the southern nation.
Overall, the EU receives around 40% of its gas imports from Russia. The reduction in flows could hit households hard, as well as companies that depend on the raw material to produce their goods.
Speaking to CNBC on Friday, Alfred Stern, CEO of one of Europe’s biggest energy companies, OMV, said it would be nearly impossible for the EU to find alternatives to Russian gas in the near term.
“We must be quite clear: in the short term, it will be very difficult, if not impossible, for Europe to replace Russian gas flows. So this may be a medium-long term debate… but in the short term, I think we have to stay focused and ensure that European industry and European households are also supplied with gas,” Stern said.
This is breaking news and it is being updated.