Inflation in the eurozone reaches new record high of 8.6%

Soaring energy prices have pushed inflation across the eurozone to a new high of 8.6% in June.

The record-breaking figure, up from 8.1% in May, spells bad news for the European economy, which is currently dealing with several challenges at the same time: the war in Ukraine, dwindling supplies of Russian gas, global food insecurity, disrupted supply chains and the ripple effects from stringent lockdowns in China.

Energy continues to be the main driver of expensive prices, with a 41.9% price on an annual basis, as EU countries rush to replace cheap Russian fossil fuels with alternative, high-priced suppliers.

Unprocessed food, like vegetables and fruit, are also experiencing a marked increase (11.1%) as high gas prices turn fertilisers costlier for farmers and producers.

No EU country is spared from the pains of inflation, which has never been been so high in the history of the single currency. The phenomenon has become an extremely pressing and intricate challenge for policymakers, companies and consumers.

The Baltic countries remain particularly affected by the upward trend in prices — Estonia (22%), Lithuania (20.5%) and Latvia (19%) — due to their heavy reliance on foreign imports to meet their energy needs.

Spain becomes the first big member state to record double-digit inflation, with a 10% mark, while Germany saw a small decrease in June (8.2%) compared to May (8.7%).

The eurozone countries with the lowest inflation numbers are still Malta (6.1%) and France (6.5%). France obtains most of its electricity from nuclear power, shielding the country from the volatility of gas markets.

The latest inflation reading from Eurostat comes weeks after the European Central Bank (ECB) announced the first hike of interest rates in more than a decade with the goal of bringing down prices.

ECB President Christine Lagarde said her institution will continue to raise interest rates if the inflation situation deteriorates, something June’s data appears to confirm.

The 8.6% figure registered last month is more than four times the 2% annual target set by the ECB.