To get the most out of this website it's best viewed on a more up-to-date browser. See how to update your browser.

Europe Insights - October 2021

Surfing on inflation risks
29 October 2021
    Download the full reportPDF, 2.44MB

    Europe Insights - Macro, equity and fixed income monthly

    • Eurozone inflation reached 3.4 per cent in September, its highest level since 2008, based on persisting global supply-chain disruptions, and more significantly, rising energy prices (close to ten per cent of the eurozone inflation index)
    • The energy shock raises the risk of a cost-push effect by hitting household real income and demand, a situation that could threaten the region's recovery
    • The EU commission and some governments have adopted measures to limit the rise of utility prices and its negative effect on consumer real incomes through the winter. Overall, there is scope for labour participation to rebound to pre-Covid levels in the region, suggesting that pay rises could be contained on aggregate
    • In the end, barring any policy mistakes, the risk that eurozone inflation would spiral up out of control is very low. Eurozone inflation will more likely settle closer to two per cent in the medium term, quite a change, and a welcome development from the subdued pace seen in the previous decade