Inflation in the doomed Eurozone increased 4.9% in November, marking the highest level of inflation since the creation of the euro. The larger economies within the bloc experienced a significant rise in inflation, with Germany posting a 6% increase and France experiencing a 3.4% rise. Other nations saw extreme spikes such as Estonia and Lithuania that reported increases of 8.4% and 9.3%.
Artificially lowering rates has backfired; the inverse relationship between reducing rates and increased inflation is now extremely apparent. Like the Federal Reserve, the European Central Bank (ECB) is aiming for a 2% inflation target. The ECB does not see anything wrong with its current policy. ECB President Christine Lagarde said that the bank will not raise rates in 2022, although they anticipate inflation to continue into the new year. “We still see inflation moderating in the next year, but it will take longer to decline than originally expected,” Lagarde stated in mid-November. Instead of changing the policy, Lagarde will simply revise inflation forecasts at the December meeting, marking the sixth consecutive time the ECB has done so. She should take a page from Powell’s book and retire the term “transitory” when discussing inflation.
