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Eurozone inflation hits record 9.1% year over year in August

Yahoo Finance Live’s Brian Cheung discusses Eurozone inflation hitting a record-high in August.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: Pressure is on for the European Central Bank as eurozone consumer prices rose 9.1% in August versus a year earlier, touching a fresh record. And here for more on the inflation picture is Yahoo Finance's Fed correspondent Brian Cheung. Brian, take it away.

BRIAN CHEUNG: Yeah, well, you know, if you think inflation is bad here in the United States, Europe experiencing even worse inflation when you take a look, as you mentioned, at that 9.1% figure that they released in their flash estimate earlier this morning.

If you unpack by country, obviously, your mileage will vary depending on what you're looking at. Some countries not as bad as 9.1%. When you take a look, for example, at Germany at 8.8% on a year-over-year basis. You have even France, for example, only at 6.5% year-over-year. But then take a look at Spain, for example, 10.3%. And that Estonia, 25.2% increases, in terms of prices, on a year-over-year basis.

And a lot of this is because of the energy crisis, right? They are a lot more exposed to what's happening in Russia and Ukraine with the [? off-lining ?] of Russian energy. That led to a 38.3% year-over-year increase, which led to that headline inflation.

But overall, the concern is that this number, that 9.1% figure, is going to get even larger. We've heard a lot of countries talk about that cold, dark winter that they're expecting with the energy crisis expected to last through those colder months. What does that do to overall inflation? Does that mean we see double-digit inflation in the euro area?

The expectation is yes. That's why you have some like Bank of America Security saying, they expect to see the European Central Bank try to tighten more than expected, 75 basis points expected in their next meeting.

And by the way, just one little fun fact about the Eurostat. They have food, alcohol, and tobacco all looped into one. Whereas the American CPI actually breaks out alcohol and tobacco as a separate "other goods" category. So I guess it's all-- it's the same thing.

BRAD SMITH: I guess we use that as a barometer of really how bad things are with [INAUDIBLE] going up quite a bit. You know, it comes out-- as we'd also seen Credit Suisse yesterday, they had really pulled back their kind of global equities call as well. And it was really kind of indicative of what we're seeing more internationally and where there is that overlap. So particularly here, I guess, what are you expecting? What are you continuing to hear from some of the expectations for even GDP growth or contraction, especially in the eurozone as well right now?

BRIAN CHEUNG: Well, I mean, you know, in the same way that here in the United States, we are worried about the inflationary pressures either tipping us into a recession or a hawkish central bank tipping us into a recession, same story in Europe. Actually, if anything, even more pronounced.

And that's because of the fact that you have central banks trying to take demand down postcrisis. A lot of that revenge spending is a part of the inflationary story as well. But a lot of that is also due to the supply issues on the energy side, which the ECB has no control over.

So they're trying to time all of this with even more factors out of their control than the Federal Reserve is. And that is leading to a very challenging situation where you could see a situ-- you could see the argument for a recession in either of those scenarios, either central bank-induced or inflationary-induced.

And you know, here in the United States we have to remember-- let's say, for example, in a bright sky, sunny scenario the Federal Reserve manages to get that soft landing that they're talking about without materially increasing the unemployment rate but getting inflation back down. What if they can achieve that but there's a spillover effect from recession happening in Europe?

And remember, there's a slowdown happening in the world's second largest economy in China as well. Those global factors are very much a part of that uncertainty that Fed officials are gonna have to navigate as well.

BRIAN SOZZI: I can't wait to see all your coverage, Brian.

BRAD SMITH: [LAUGHS] Thanks so much.

BRIAN CHEUNG: Yup.

BRAD SMITH: Yahoo Finance's own Brian Cheung joining us here on the desk for this breakdown.