Peter Schiff highlights Eurozone inflation as more problematic than US inflation, according to his latest business interview.
“The 75-basis point rate hike was huge by ECB standards, but it’s still basically spitting into the ocean when it comes to battling eurozone inflation,” said Peter Schiff.
Relative to the US inflation rate is how Peter Schiff highlights Eurozone inflation woes.
The current eurozone inflation rate is worse than that of the US.
Last month, August, US core inflation posted 8.3% compared with 9.1% in August.
“The 75-basis point rate hike was huge by ECB standards, but it’s still basically spitting into the ocean when it comes to battling eurozone inflation”
PETER SCHIFF
The ECB’s 75 basis point rate hike, three-quarters of one percent, brings the eurozone interest rate to 1.25%.
Inflation in the eurozone was negative in January 2022, so this is a price shock in a short space of time. Spiraling energy costs, which are policy-driven support for the Ukrainian war and Russian sanctions combined with euro currency debasement, are contributing to more problematic inflation in the eurozone.
Peter Schiff highlights Eurozone inflation noting the aggressive ECB monetary policy shift from zero and negative interest rate policy to a positive 1.25% in less than 12 months
But Peter Schiff thinks the ECB interest rate of 1.25% is still too loose to put out the eurozone inflation fire.
“ECB is spitting in the ocean,” he said.
“Spiraling energy costs, which are policy-driven support for the Ukrainian war and Russian sanctions combined with euro currency debasement, are contributing to more problematic inflation in the eurozone”
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Peter Schiff highlights Eurozone inflation as a problem with no easy solution
Peter Schiff points out that even with the hiking, the real interest rate is still -7.85%. “That’s not going to slay 9.1% inflation,” said Peter Schiff. So the ECB is just making a symbolic move and in reality, these minuscule rate hikes are not going to do much to put out the inflation fire.
ECB president Christine Lagarde’s 75 basis point hike is rhetoric and larger hikes are needed to confirm the ECB is firmly in the inflation-fighting camp.
But there are massive budget deficits in the peripheral states which could be why the ECB is reluctant to step into the ring and fight inflation.
“As bad as our inflation has been, think about how much worse it would have been had the dollar been weak as opposed to strong” – Peter Schiff
The 2013 euro sovereign debt crisis was not resolved, instead, the easy road was taken with more printing of cash
Low level of productivity, lack of private enterprise, an aging population, and ballooning public spending remain, particularly in the south. The public sector is the largest employer.
But simply higher ECB rate hikes would likely widen peripheral EU sovereign yield spreads, and if so, that would potentially trigger a worse euro sovereign debt crisis, bearing in mind public debts are larger today.
If the ECB is serious about fighting inflation, that could be problematic for US inflation too, which is why Peter Schiff highlights Eurozone inflation as a no-easy fix.
Peter Schiff said euro weakness is also one of the reasons US inflation isn’t even higher.
Euro weakness is adding to eurozone inflation.
America has the benefit of a strong dollar, making US inflation weaker.
As bad as our inflation has been, think about how much worse it would have been had the dollar been weak as opposed to strong
— at least relative to other currencies,” he said.
