LONDON -- Inflation in the 19 countries that use the euro currency hit its highest level on record, led by surging food and energy costs, figures released Friday show.
Consumer prices in the eurozone, made up of European Union economies like France and Germany, rose 5% in December compared with the previous year, according to Eurostat, the EU's statistics office.
Energy prices led the increase, jumping 26% over the past year, slightly lower than the previous month. Inflation in food prices picked up steam to 3.2%, from November's 2.2% rate, and the price of goods rose at a faster pace of 2.9%.
However, price increases for services eased to 2.4%, suggesting that the omicron variant of covid-19 crimped demand for holiday travel. After stripping out potentially volatile items such as food and energy, the eurozone's core inflation rate held steady at 2.6%.
The latest reading smashes the record of 4.9% set in November and marks the highest level of inflation since record-keeping for the euro currency began in 1997, two years before its actual launch.
It means everything from food at the grocery store to shopping trips and fuel are costing more as the economic recovery from the pandemic has increased demand for energy and snarled global supply chains.
The numbers underline how inflation has emerged as one of the main issues with which economic policymakers are grappling.
It compounds pressure for the European Central Bank to act on inflation since it's kept interest rates ultra-low to stimulate an economy recovering from the depths of the pandemic. The arrival of omicron has forced a rethink of any decisions that might throttle economic growth, and analysts don't expect the European bank to raise rates until 2023.
Inflation is not just the EU's problem. Consumer prices in the U.S. have risen at their fastest pace in 39 years, and at their highest clip in more than a decade in Britain. Turkish inflation hit 36% last month -- the highest in 19 years -- and Brazil saw it accelerate to more than 10%, the fastest pace in 18 years.
Some economists think inflation in the eurozone will peak soon, if it hasn't already. One big factor is natural gas prices, "which have been incredibly volatile in recent weeks and a dominant driver of the recent inflation surge," Bert Colijn, senior economist at ING Bank, said in a report.
Energy prices are set to remain volatile this winter amid dwindling stockpiles of natural gas and concerns about supply from Russia. Around the New Year, European gas prices fell sharply but then jumped 30% Tuesday. They remain several times higher than normal prices.
The European Central Bank expects energy prices to stabilize throughout the year and supply bottlenecks to ease, allowing inflation to eventually fall back. European policymakers have argued that because most of the jump in inflation will be temporary, they do not need to respond aggressively by raising interest rates or ending all of the bank's bond-buying programs.
Colijn and other economists predict that core inflation will ease but stay at or above 2% this year, giving the European Central Bank some breathing room when it comes to a rate decision.
According to some analysts, the eurozone may have reached the peak in inflation.
"In the near term, eurozone inflation is set to decline," Salomon Fiedler, an economist at Berenberg bank, wrote in a note to clients.
Despite omicron surging and its uncertain effects on the global economy, central banks have been raising interest rates to fight soaring inflation or taking steps in that direction.
The Bank of England last month became the first central bank in a major advanced economy to raise interest rates since the pandemic began. The European Central Bank has taken a much more cautious approach but also decided to start carefully dialing back some of its stimulus efforts over the next year.
The U.S. Federal Reserve is moving faster than Europe to tighten credit as consumer prices jumped 6.8% over the past year in November.
Information for this article was contributed by Kelvin Chan of The Associated Press and by Eshe Nelson of The New York Times.