The growth in the European countries has already slowed down, but it seems to be having no effect on European inflation though. As a result, EU officials now have a difficult economic condition with risks of recession and a difficult winter.
Around 19 countries in Europe use the common currency EURO, where inflation has reached a record 10.7%, according to data from the European Commission. Just a few months ago, it was only at 9.9% and around 4.1% just 1 year ago.
This steady rise in inflation is making it difficult for the central bankers and the elected leaders of Europe. In an attempt to curb inflation, the ECB announced another internet rate hike recently. Looking back, an interest rate hike of this scale was not seen since 1999, which was the early days of the Eurozone.
Furthermore, the ECB's attempts to control inflation have now raised fears that it will lead to a recession. The ECB actions are making it expensive to borrow capital and are slowing down investments. As a direct result of these actions by the ECB, unemployment is also increasing in European countries.
Recently, IMF has also issued a warning that the EU leaders will have tough choices to make. Currently, the EU is facing a very toxic mix of high inflation and weak growth that can get even worse!
The output in the EU countries increased by 0.2% during the 3rd quarter and was better than the market expectations. However, this doesn't mean that recession in the EU region will stop... Instead, all the major analysts believe that recession in the EU countries is now inevitable. Furthermore, many analysts are of the view that growth in the last quarter could deteriorate and will things even more difficult.
So, for now, the European Central Bank has some tough decisions to make... On the one hand, ECB has to control high inflation. And on the other hand, ECB needs to stop the economy from entering into a recession!