Why is eurozone inflation so high?

Eurozone inflation soared to a new record high of 8.1 per cent in the year to May, piling pressure on the European Central Bank to speed up the pace of its exit from ultra-loose monetary policy.

The jump in eurozone price growth, from 7.4 per cent the previous month, was much higher than forecast by economists, who had expected 7.7 per cent, according to a Reuters poll. The core number, which excludes more volatile energy and food prices and is closely watched by ECB policymakers, also rose above expectations to 3.8 per cent, up from 3.5 per cent in April.

Here is more from the FT.  A few questions:

1. Why is eurozone services inflation so high, given that the eurozone didn’t do a massive Biden-style stimulus?

2. Were the global monetarists right all along about the key role of the U.S. dollar?

3. Is this all just second-order effects from energy price spikes?  But then how do services fit into the picture?

4. Why exactly is inflation 20.1 percent in Estonia?

So exactly which views do we at least to think about revising?  Here are some remarks by Jason Furman.


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