Energy prices and disruptions caused by the war in Ukraine caused consumer prices in the eurozone to surge by a new record of 7.5 per cent, EU statistics agency Eurostat said Friday.
The rise from an already record 5.9 per cent in February was fuelled by a 44.7-per cent year-on-year hike in energy prices, with Europe caught in an oil and gas crunch due to tensions with Russia over its invasion of its pro-Western neighbour.
European Central Bank president Christine Lagarde warned Wednesday that a prolonged Ukraine conflict will keep energy prices and the cost-of-living spiralling, blighting a post-Covid recovery.
Similar leaps in inflation have been seen in the United States where the Federal Reserve is committed to a long series of interest hikes to cool the economy and stem the price hikes.
But the ECB is reluctant to take similar measures, convinced that the rise in the cost of living is linked to the war as well as lingering disruptions to the global supply chains brought on by the coronavirus pandemic.
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Of particular concern for policymakers is core inflation, which strips out volatile components such as energy and food. It soared to 3.0 per cent in March, Eurostat said.
This is a full percentage point on top of the ECB's target of two per cent and will give armour to critics that argue for interest hikes to face down inflation.
But raising interest rates would put the brakes on the post-pandemic recovery, with economists already warning that current forecasts for growth in Europe are certain to take a hit due to the war in Ukraine.
