"EU Member States Inflation Gap Widens, Raising Concerns Over Euro Currency Confidence"

[Asia Economy Reporter Seo So-jung] As the inflation gap among European Union (EU) member countries widens, there is an analysis that the debate over the pace of future interest rate hikes is overheating, increasing market uncertainty and potentially weakening confidence in the euro.

On the 19th, Jiman-su, Senior Research Fellow at the Korea Institute of Finance, stated in the report "European Central Bank's Base Rate Hike and Inflation Gap Among Member Countries," "The European Central Bank (ECB) is expected to begin raising interest rates for monetary policy normalization from the second half of the year, but since inflation in the Eurozone is severe, uncertainty over the pace of rate hikes is emerging."

In particular, the inflation gap among the 19 Eurozone member countries is widening, which is expected to become a new variable in deciding the pace of base rate hikes.

According to the report, comparing the consumer price index (HICP, the price index used by the ECB) inflation rates of EU member countries in April shows a difference of up to 13 percentage points (p). France's HICP inflation rate was 5.4%, Italy's 6.3%, Germany's 7.8%, and Spain's 8.3%, all single digits, but the Netherlands recorded 11.2% and Estonia 19.1%, both double digits.

The ECB determines the base interest rate through the policy committee composed of six permanent executive members and the central bank governors of the 19 member countries during monetary policy meetings.

Researcher Ji pointed out, "Until now, the difference in inflation rates among member countries was not large, so issues arising from a single currency and a single base interest rate did not stand out, but this year, the gap in inflation levels among countries has grown to an unprecedented level. Due to the complex economic situations of each country, various controversies over the pace of ECB's rate hikes may overheat in the second half of this year."

This content was produced with the assistance of AI translation services.