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    Eurozone Inflation Reaches 10.7 Percent as Economies Slow Down

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    The rise in consumer prices hit another record in October, with more than half of the countries that use the euro registering double-digit increases.Consumer prices in the countries that use the euro as their currency rose at a stunning annual rate of 10.7 percent in October, the European Commission reported on Monday, while economic growth across the continent grew by 0.2 percent over the quarter that spanned July, August and September.Prices have been on an relentless upward march since last year, as painfully high energy and food prices continued to push inflation to record levels. Over the past 12 months, energy prices rose by 41.9 percent while food prices increased by 13.1 percent.More than half of the 19 countries in the eurozone recorded double-digit inflation rates in the year through October, including Germany (11.6 percent), the Netherlands (16.8 percent), Italy (12.8 percent) and Slovakia (14.5 percent), with the Baltic countries at the highest end of the spectrum with rates over 21 percent.In September, the inflation rate across the eurozone was 9.9 percent. Twelve months ago, it was 4.1 percent.“This is a significant acceleration,” said Lucrezia Reichlin, an economist at the London Business School. “Inflation is becoming broad-based.”Although economic growth overall slowed from 0.8 percent in the second quarter — April, May and June — some countries registered bigger expansions than analysts anticipated. Germany, Europe’s largest economy, grew by 0.3 percent during the third quarter, driven in part by consumer spending. Italy’s economy grew by 0.5 percent and Sweden’s by 0.7 percent. Elsewhere, growth slowed. In France and Spain, growth increased by just 0.2 percent. Austria and Belgium saw their economies shrink by 0.1 percent.In the larger bloc of 27 countries that make up the European Union, third-quarter growth also increased by 0.2 percent.The International Monetary Fund has warned that “European policymakers face severe trade-offs and tough policy choices as they address a toxic mix of weak growth and high inflation that could worsen.”Inflation is vexing many of the world’s economies and may worsen, particularly in the wake of Russia’s withdrawal from an agreement that allowed grain exports from Ukraine that is likely to push up food prices.Last week, the United States announced that consumer prices rose by 6.2 percent in the year through September, by one measure. Britain’s inflation rate was 8.8 percent over the same period.Central banks appear resolutely determined to halt the rise. “Inflation remains far too high and will stay above the target for an extended period,” Christine Lagarde, the president of the European Central Bank, said last week after announcing the bank was raising interest rates by three-quarters of a percentage point for the second time in a row.The International Monetary Fund has also urged central bankers to stay the course possibly through next year. It noted that “almost half the recent surge in European core inflation remains unexplained by its usual drivers,” suggesting that the war in Ukraine and aftershocks of the coronavirus pandemic were contributing to a new inflationary dynamic.The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point when policymakers meet on Wednesday. It would be the sixth increase this year. The Bank of England, meeting on Thursday, is also expected to raise rates by the same amount.However painful higher interest rates may be for consumers and borrowers in the United States, the sting is even sharper in other regions around the world. Higher interest rates attract investors, which pushes up the value of the dollar. For emerging nations with high debt bills denominated in dollars, though, their already heavy burden grows even larger. At the same time, nations that have to import American goods or essentials like energy and food that are often priced in dollars, get much more expensive. Those countries get poorer.While most economists have urged a hard line on inflation, there are an increasing number of voices questioning whether central bankers are going too far, too fast. Higher interest rates are not going to suddenly increase the supply of oil, wheat and microchips, and may even exacerbate shortages by stunting investment.There is also fear that efforts to corral inflation will accelerate countries’ slide into recession by choking off investment and raising unemployment. Several analysts said on Monday that they expected growth in the final three months of the year to deteriorate.Andrew Kenningham, the chief Europe economist at Capital Economics, warned in a report that the eurozone “is heading for a deeper recession and higher inflation than most expect.” More

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    Central Banks Accept Pain Now, Fearing Worse Later

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    Federal Reserve officials and their counterparts around the world are trying to defeat inflation by rapidly raising interest rates. They know it will come at a cost.A day after the Federal Reserve lifted interest rates sharply and signaled more to come, central banks across Asia and Europe followed suit on Thursday, waging their own campaigns to crush an outbreak of inflation that is bedeviling consumers and worrying policymakers around the globe.Central bankers typically move slowly. That’s because their policy tools are blunt and work with a lag. The interest rate increases taking place from Washington to Jakarta will need months to filter out across the global economy and take full effect. Jerome H. Powell, the Fed chair, once likened policymaking to walking through a furnished room with the lights off: You go slowly to avoid a painful outcome.Yet officials, learning from a history that has illustrated the perils of taking too long to stamp out price increases, have decided that they no longer have the luxury of patience.Inflation has been relentlessly rapid for a year and a half now. The longer that remains the case, the greater the risk that it is going to become a permanent feature of the economy. Employment contracts might begin to factor in cost-of-living increases, companies might begin to routinely raise prices and inflation might become part of the fabric of society. Many economists think that happened in the 1970s, when the Fed tolerated out-of-control price increases for years — allowing an “inflationary psychology” to take hold that later proved excruciating to crush.But the aggressiveness of the monetary policy action now underway also pushes central banks into new and risky territory. By tightening quickly and simultaneously when growth in China and Europe is already slowing and supply chain pressures are easing, global central banks risk overdoing it, some economists warn. They may plunge economies into recessions that are deeper than necessary to curb inflation, sending unemployment significantly higher.“The margin of error now is very thin,” said Robin Brooks, chief economist at the Institute of International Finance. “A lot of this comes down to judgment, and how much emphasis to put on the 1970s scenario.”In the 1970s, Fed policymakers did lift interest rates in a bid to control inflation, but they backed off when the economy began to slow. That allowed inflation to remain elevated for years, and when oil prices spiked in 1979, it reached untenable levels. The Fed, under Paul A. Volcker, ultimately raised rates to nearly 20 percent — and sent unemployment soaring to more than 10 percent — in an effort to wrestle the price increases down.That example weighs heavily on policymakers’ minds today.“We think that a failure to restore price stability would mean far greater pain later on,” Mr. Powell said at his news conference on Wednesday, after the Fed raised rates three-quarters of a percentage point for a third straight time. The Fed expects to raise borrowing costs to 4.4 percent next year in the fastest tightening campaign since the 1980s.The Bank of England raised interest rates half a point to 2.25 percent on Thursday, even as it said the United Kingdom might already be in a recession. The European Central Bank is similarly expected to continue raising rates at its meeting in October to combat high inflation, even as Russia’s war in Ukraine throws Europe’s economy into turmoil.As the major monetary authorities lift borrowing costs, their trading partners are following suit, in some cases to avoid big moves in their currencies that could push up local import prices or cause financial instability. On Thursday, Indonesia, Taiwan, the Philippines, South Africa and Norway lifted rates, and a large move by Switzerland’s central bank ended the era of below-zero interest rates in Europe. Japan has comparatively low inflation and is keeping rates low, but it intervened in currency markets for the first time in 24 years on Thursday to prop up the yen in light of all of the action by its counterparts.The wave of central bank action is expected to have consequences, working by design to sharply slow both interconnected commerce and national economies. The Fed, for instance, sees its moves pushing U.S. unemployment to 4.4 percent in 2023, up from the current 3.7 percent.A housing development in Phoenix. Climbing interest rates are already making it more expensive to borrow money to buy a car or purchase a house in many nations.Adriana Zehbrauskas for The New York TimesAlready, the moves are beginning to have an impact. Climbing interest rates are making it more expensive to borrow money to buy a car or a house in many nations. Mortgage rates in the United States are back above 6 percent for the first time since 2008, and the housing market is cooling down. Markets have swooned this year in response to the tough talk coming from central banks, reducing the amount of capital available to big companies and cutting into household wealth.Yet the full effect could take months or even years to be felt.Rates are rising from low levels, and the latest moves have not yet had time to fully play out. In continental Europe and Britain, the war in Ukraine rather than monetary tightening is pushing economies toward recession. And in the United States, where the fallout from the war is far less severe, hiring and the job market remain strong, at least for now. Consumer spending, while slowing, is not plummeting.That is why the Fed believes it has more work to do to slow the economy — even if that increases the risk of a downturn.“We have always understood that restoring price stability while achieving a relatively modest increase in unemployment, and a soft landing, would be very challenging,” Mr. Powell said on Wednesday. “No one knows whether this process will lead to a recession, or if so, how significant that recession would be.”Many global central bankers have painted today’s inflation burst as a situation in which their credibility is on the line.“For the first time in four decades, central banks need to prove how determined they are to protect price stability,” Isabel Schnabel, an executive board member of the European Central Bank, said at a Fed conference in Wyoming last month.A FedEx worker making deliveries in Miami Beach. Consumer spending in the United States, while slowing, is not plummeting.Scott McIntyre for The New York TimesBut that does not mean that the policy path the Fed and its counterparts are carving out is unanimously agreed upon — or unambiguously the correct one. This is not the 1970s, some economists have pointed out. Inflation has not been elevated for as long, supply chains appear to be healing and measures of inflation expectations remain under control.Mr. Brooks at the Institute of International Finance sees the pace of tightening in Europe as a mistake, and thinks that the Fed, too, could overdo it at a time when supply shocks are fading and the full effects of recent policy moves have yet to play out.Maurice Obstfeld, an economist at the Peterson Institute for International Economics and a former chief economist of the International Monetary Fund, wrote in a recent analysis that there is a risk that global central banks are not paying enough attention to one another.“Central banks clearly are scrambling to raise interest rates as inflation runs at levels not seen for nearly two generations,” he wrote. “But there can be too much of a good thing. Now is the time for monetary policymakers to put their heads up and look around.”Still, at many central banks around the world — and clearly at Mr. Powell’s Fed — policymakers are treating it as their duty to remain resolute in the fight against price increases. And that is translating into forceful action now, regardless of the imminent and uncertain costs.Mr. Powell may have once warned that moving quickly in a dark room could end painfully. But now, it’s as if the room is on fire: The threat of a stubbed toe still exists, but moving slowly and cautiously risks even greater peril. More

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    Shock Waves Hit the Global Economy, Posing Grave Risk to Europe

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    The threat to Europe’s industrial might and living standards is particularly acute as policymakers race to decouple the continent from Russia’s power sources.Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”Several countries, including Germany, the region’s largest economy, built up a decades-long dependence on Russian energy. The eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.The risk of sinking incomes, growing inequality and rising social tensions could lead “not only to a fractured society but a fractured world,” said Ian Goldin, a professor of globalization and development at Oxford University. “We haven’t faced anything like this since the 1970s, and it’s not ending soon.”Other regions of the world are also being squeezed, although some of the causes — and prospects — differ.Gazprom, Russia’s state-owned energy company, said this week that it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.Hannibal Hanschke/EPA, via ShutterstockHigher interest rates, which are being deployed aggressively to quell inflation, are trimming consumer spending and growth in the United States. Still, the American labor market remains strong, and the economy is moving forward.China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.A troubled real estate market has added to the economic instability in China. Hundreds of thousands of people are refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More

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    Global Central Banks Ramp Up Inflation Fight

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    Central banks in the U.S., Europe, Canada and parts of Asia are lifting interest rates rapidly as they try to wrestle breakneck inflation under control.Central bankers around the world are lifting interest rates at an aggressive clip as rapid inflation persists and seeps into a broad array of goods and services, setting the global economy up for a lurch toward more expensive credit, lower stock and bond values and — potentially — a sharp pullback in economic activity.It’s a moment unlike anything the international community has experienced in decades, as countries around the world try to bring rapid price increases under control before they become a more lasting part of the economy.Inflation has surged across many advanced and developing economies since early 2021 as strong demand for goods collided with shortages brought on by the pandemic. Central banks spent months hoping that economies would reopen and shipping routes would unclog, easing supply constraints, and that consumer spending would return to normal. That hasn’t happened, and the war in Ukraine has only intensified the situation by disrupting oil and food supplies, pushing prices even higher.Global economic policymakers began responding in earnest this year, with at least 75 central banks lifting interest rates, many from historically low levels. While policymakers cannot do much to contain high energy prices, higher borrowing costs could help slow consumer and business demand to give supply a chance to catch up across an array of goods and services so that inflation does not continue indefinitely.The European Central Bank will meet this week and is expected to make its first rate increase since 2011, one that officials have signaled will most likely be only a quarter point but will probably be followed by a larger move in September.Other central banks have begun moving more aggressively already, with officials from Canada to the Philippines picking up the pace of rate increases in recent weeks amid fears that consumers and investors are beginning to expect steadily higher prices — a shift that could make inflation a more permanent feature of the economic backdrop. Federal Reserve officials have also hastened their response. They lifted borrowing costs in June by the most since 1994 and suggested that an even bigger move is possible, though several in recent days have suggested that speeding up again is not their preferred plan for the upcoming July meeting and that a second three-quarter-point increase is most likely.As interest rates jump around the world, making money that has been cheap for years more expensive to borrow, they are stoking fears among investors that the global economy could slow sharply — and that some countries could find themselves plunged into painful recessions. Commodity prices, some of which can serve as a barometer of expected consumer demand and global economic health, have dropped as investors grow jittery. International economic officials have warned that the path ahead could prove bumpy as central banks adjust policy and as the war in Ukraine heightens uncertainty.“It is going to be a tough 2022 — and possibly an even tougher 2023, with increased risk of recession,” Kristalina Georgieva, the managing director of the International Monetary Fund wrote.Pool photo by Sonny Tumbelaka“It is going to be a tough 2022 — and possibly an even tougher 2023, with increased risk of recession,” Kristalina Georgieva, the managing director of the International Monetary Fund, said in a blog post on Wednesday. Ms. Georgieva argued that central banks need to react to inflation, saying that “acting now will hurt less than acting later.”Ms. Georgieva pointed out that about three-quarters of the institutions the fund tracks have raised interest rates since July 2021. Developed economies have lifted them by 1.7 percentage points on average, while emerging economies have moved by more than 3 percentage points.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    Where Interest Rates Are Up Around the World

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    Countries that have raised their policy interest rate this year Arrow lengths are each country’s most recent increase in percentage points. Saudi Arabia The Eurozone rate will increase by 0.25 in July. Countries that have raised their policy interest rate this year Eurozone rate will increase by 0.25 in July. United States South Korea Saudi […] More

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    A Weak Euro Heads to an Uncomfortable Milestone: Parity With the Dollar

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    The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

    The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”Also in the dollar’s favor is the aggressive action of the Federal Reserve. With inflation in the United States hovering around its highest rate in four decades, the central bank has ramped up its tightening of monetary policy with successive interest rate increases, and many more are predicted. Traders are betting that U.S. interest rates will climb another 2 percentage points by early next year to 3 percent, the highest level since 2007.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Weakened Euro May Become Equal to the U.S. Dollar

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    The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

    The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Eurozone Inflation Hits 7.5 Percent as Energy Prices Soar

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    PARIS — Soaring energy and food prices driven by Russia’s continued aggression against Ukraine pushed inflation in Europe last month to levels not seen in four decades, with prices in the 19 countries that use the euro soaring 7.5 percent, according to data released Friday by Europe’s statistics agency.The unprecedented run-up in prices from already record levels was the latest marker of just how rapidly the impact of the war in Ukraine is coursing through Europe’s economy, putting pressure on the European Central Bank to begin raising interest rates, possibly before the end of the year.“The rate of inflation has once again come in considerably higher than we expected,” Joachim Nagel, the president of Germany’s Bundesbank, said on Twitter. “Monetary policy should not pass up the opportunity for timely countermeasures.”Surging energy costs have posed the biggest threat, causing a sharp spike in costs for European businesses and households and lashing Europe’s economic rebound from the Covid-19 pandemic. Energy prices rocketed nearly 45 percent in March from a year earlier, as the conflict has caused​​ dizzying jumps in natural gas, electricity and oil prices.Europe and the United States are making ambitious plans to reduce reliance on Russian energy to offset the threat to the European economy and energy security. Last week, the United States agreed to increase shipments of natural gas to help wean Europe off Russian energy.Germany, the biggest user of Russian energy in Europe, is also aiming to slash in half its imports of Russian oil and coal this year, and end its dependence on Russian natural gas by the middle of 2024. Europe’s largest economy, Germany is already suffering an economic blow from the crisis. The German Council of Economic Experts, which advises the government in Berlin, this week slashed its forecast for growth in 2022 by more than half, to 1.8 percent.Adding to the economic strain on Europe are surging food costs, as supplies of wheat, corn and barley remained trapped in Russia and Ukraine, which produce a major portion of those crops for world consumption.Prices for unprocessed food rose at an annual rate of 7.8 percent last month, Eurostat said. Since the invasion, global wheat prices have increased 21 percent, barley 33 percent and some fertilizers 40 percent, threatening a food crisis.Even without food and energy, core inflation in the eurozone also continued to rise as inflation in goods and services accelerated.The biggest overall increases were recorded in Lithuania (15.6 percent), Estonia (14.8 percent) and the Netherlands (11.9 percent). Consumer prices in Germany leaped 7.6 percent compared with last year, and 9.8 percent in Spain.Christine Lagarde, president of the European Central Bank, expects food and energy prices to stabilize at high levels.Iakovos Hatzistavrou/Agence France-Presse — Getty ImagesOn Wednesday, the central bank’s president, Christine Lagarde, said she expected food and energy prices in the eurozone to stabilize at high levels, allowing the area to avoid falling into a quagmire of high inflation and stagnant growth. The bank recently announced plans to scale back some of its bond-buying stimulus measures.But analysts say much more pain lies ahead, as the war keeps upward pressure on prices and persistently high energy costs reverberate through the economy. The Kremlin’s threat to cut off European supplies of Russian oil and gas unless payments are made in rubles has raised the specter of even higher energy costs.Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a note to clients that should Russia cut off gas to Europe, prices would soar, although Moscow was unlikely to take this step. A cease-fire agreement between Russia and Ukraine, if one is reached, would send energy prices tumbling.But governments around Europe are taking no chances, pledging billions of euros in subsidies to shield businesses and households from the pain of surging energy bills that have hurt consumer purchasing power.“Households are becoming more pessimistic and could cut back on spending,” Ms. Lagarde said in a speech in Cyprus on Wednesday. “The longer the war lasts, the higher the economic costs will be and the greater the likelihood we end up in more adverse scenarios.”Denmark is earmarking 2 billion Danish crowns ($299 million) to spend on “heat checks” for over 400,000 hard-hit households. France is capping an increase on regulated electricity costs at 4 percent and is spending a total of 26 billion euros to help companies and households offset higher gas and power bills.In Germany, where the war in Ukraine and inflation have also put significant pressure on consumer sentiment, Chancellor Olaf Scholz’s government has approved €4.5 billion in tax relief measures.The war has also added to the strain on supply chains that were already stretched by the pandemic, continuing to press on producer prices and the cost of goods for consumers.“The question is whether the worst is behind us now, and that seems doubtful,” Bert Colijn, a senior eurozone economist at ING Bank, wrote in a note to clients, adding that the prospect of double-digit inflation “cannot be ruled out at this point.” More