Eurozone Inflation Unexpectedly Accelerates to Another Record High

Inflation across the European Union accelerated to another record high in December, defying expectations of a slowdown.

Preliminary data showed that headline inflation in the euro area reached 5 percent year-on-year in December, inching up from the previous month’s all-time high of 4.9 percent.

Energy prices were main drivers of the increase. Without volatile items such as energy and food, inflation comes in unchanged from November at 2.6 percent.

The new inflation data piled more pressure on the European Central Bank (ECB) to begin switching to a more aggressive policy stance.

The central bank had pledged last month to start tapering its monthly asset purchases, although said it will continue its huge pandemic stimulus in 2022, saying accommodation is needed to stabilize inflation at their 2 percent target.

ECB updated its headline inflation forecast to be 1.8 percent in both 2023 and 2024, but it still expects the 2022 rate to be well above target at 3.2 percent.

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