EU power restrictions more helpless, interest rate hikes are not only Argentina

International Business News  –  German inflation hit another high since 1990 in August. After two consecutive months of declines in June and July, German inflation accelerated once again in August. Data released by Germany’s Federal Statistical Office on September 13 showed that the inflation rate was 7.9% in August, rebounding again to the high point since 1990 set in May this year. The data showed that Germany’s consumer price index (CPI) rose 7.9% year-on-year in August, compared with 7.5% in July. The sign suggests that price pressures are continuing as the energy supply crisis continues. Economists at the Iver Institute for Economic Research said that the reduced supply of natural gas from Russia this summer and the sharp price increases it triggered have had a serious impact on Germany’s economic recovery, and the German economy is not expected to return to normal levels until 2024. According to the previously released fall forecast report of the Iver Institute of Economic Research, German inflation is expected to reach 8.1% and 9.3% this year and next, respectively, with next year’s inflation rate expected to increase significantly by 6 percentage points compared to the previous forecast.

Argentina’s central bank “violently” raised interest rates to 75%. The Federal Reserve “interest rate storm” swept under the global currency devaluation tide, and some of the economic vulnerability of emerging market countries have been on the verge of collapse. On September 14, Argentina released data showing that the current inflation rate in Argentina has reached 79%, and economists predict that inflation will rise to an even crazier 100% by the end of the year. on September 15, the Argentine central bank “violently” pulled up the benchmark interest rate to a staggering 75% to support the Argentine currency. This is also the ninth time this year that Argentina’s central bank has raised interest rates. Earlier this year, Argentina’s central bank had a small interest rate increase, but the effect is not good. In the past three months, Argentina’s central bank has been increasing the rate hike. The main reason that forced Argentina to raise interest rates is out-of-control inflation. Analysis suggests that in the short term, Argentina’s monetary tightening is not enough to cool inflation. Before the end of this year, with the cut in energy subsidies and the accelerated depreciation of the Argentine peso, Argentine inflation could push up to a level close to 90%. The Argentine peso continues to weaken, with a cumulative depreciation of nearly 30% this year. Will Argentina become another Sri Lanka and fall into a dangerous situation of national bankruptcy?

EU proposes emergency intervention in European energy markets On September 14, the European Commission proposed an emergency intervention in European energy markets to mitigate the recent sharp rise in energy prices. The main measures include member states reducing electricity consumption by at least 5% during peak hours and reducing total electricity demand by at least 10% by March 31, 2023; capping revenues of low-cost power generation companies, including renewable energy, at 180 euros per megawatt hour; and imposing a tax of at least 33% on excess profits generated by the oil, gas, coal and refining sectors. The European Commission said the latter two measures would help the EU raise about 140 billion euros in funding. The European Commission proposal requires the support of the majority of EU member states to be approved. EU energy ministers plan to hold another special energy meeting on Sept. 30. On September 12, the Czech government announced that it will impose price limits on electricity and natural gas from November. Czech Finance Minister Stanjula said the measures are expected to cost 130 billion kronor of the budget, of which 70 billion kronor is expected to be covered by next year by taxes the government plans to collect from energy companies and others. According to the Czech Statistical Office, the country’s inflation rate rose for the 13th consecutive month in July, reaching 17.5 percent on an annual basis, with rising food and energy prices the main drivers.