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Rough Over There

Mike Zaccardi

INFLATION IS TAKING its toll on Americans’ view of the economy. But things could be a lot worse. Exhibit A: Europe.

Last week, the U.K. reported its inflation rate had surged to a four-decade high of 9.4%. June’s reading was a significant bump up from May’s 9.1%. Even higher inflation is expected as year-end approaches, with the Bank of England seeing annual inflation hitting 11%, according to The Wall Street Journal.

In fact, consumer prices across Europe are rising rapidly amid surging energy costs. As much of the U.S. baked in the July heat, all-time record hot temperatures were notched in major population centers across the pond. Sky-high costs for summertime cooling are crimping consumers’ pocketbooks, with food and housing-related expenses also on the rise. To combat the energy crisis in Germany, streetlights are dimmer and people are taking shorter showers.

Americans headed to Europe will no doubt notice that their travels are cheaper, thanks to a much weaker euro. The financial press pounced the instant the U.S. dollar and euro hit parity. The “Big Mac Index” is often used to illustrate how cheap or expensive other parts of the world are relative to the U.S. Right now, a strong dollar means relatively inexpensive McDonald’s burgers in Europe.

Last Thursday, to combat rising inflation and a falling euro, the European Central Bank issued its first interest rate increase since 2011. Meanwhile, we’ll learn the U.S. Federal Reserve’s next move on Wednesday afternoon. The financial markets expect another 0.75 percentage point rate hike to cool off the 9.1% headline U.S. inflation rate. The big question: Will these rate increases break the back of inflation—or do further big increases lie ahead, which would likely mean more turmoil in the stock and bond markets?

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Bob Wilmes
Bob Wilmes
2 months ago

Hmm … my Big Mac which I bought on July 26 in a midwestern state was $5.49.
I don’t think our US inflation risks are over.

Chazooo
Chazooo
2 months ago
Reply to  Bob Wilmes

“You ain’t seen nothin’ yet”, to quote an old song.

corrupt
corrupt
2 months ago

Perhaps the EU is more honest about their inflation rate than the U.S.?

Edmund Marsh
Edmund Marsh
2 months ago

My wife has a niece living in London. She has been working from home since early 2020, but lately is commuting to her air conditioned office to get a break from the heat.

Nate Allen
Nate Allen
2 months ago
Reply to  Edmund Marsh

Just as long as the cost of gas to get to/from the office isn’t more than the cost of cooling her home!

Mike Zaccardi
Mike Zaccardi
2 months ago
Reply to  Edmund Marsh

Savvy move!

M Plate
M Plate
2 months ago

I remember Ronald Reagan warning the Western Europe not to become dependent on Russian oil. They didn’t listen. For years European NATO members refused to meet at least the minimum defense spending requirements for NATO membership. They’re paying the price now.

Nate Allen
Nate Allen
2 months ago
Reply to  M Plate

Ronald Reagan said several things that people didn’t listen to……to their detriment.

Mike Zaccardi
Mike Zaccardi
2 months ago
Reply to  M Plate

Unfortunately true.

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