What’s inflation and the case of 9% in Italy

Italy reports 9% inflation for the month, while Europe is not doing much better at 9.1%.

BREAKING: 🇪🇺 Eurozone inflation reaches 9.1%, the highest ever recorded.

— Watcher.Guru (@WatcherGuru) August 31, 2022

The whole world, including Italy, battles above-normal inflation

At every latitude, the number one enemy of markets and the real economy above all is inflation, first underestimated (August 2021) by the Fed and now fought vehemently to the tune of 75 basis point hikes and talk that rattles markets. The CPI figure has been and remains the bogeyman of all Central Banks.

In America, Powell and Co. are, albeit slowly, having tentative results, and although the 2% target is expected to be far from being reached, the path taken of rate hikes always seems to be the right one. 

In Europe, blamed on a smaller market and long-standing problems such as an overall sovereign debt of member states well above that of any country in the world (also a matter of timing) and a labor world in crisis, inflation is destroying what the pandemic had failed to take away from the middle class. 

The August figure stands at 9.1%, and it does no better than either former EU countries, such as Great Britain, which estimates inflation at 13.3% soon, or countries in negotiations for full EU membership such as Turkey, which even boasts a CPI of 80%.

Assuming that for different reasons the inflation of the neighboring countries to the 27 is higher (Britain because it has to deal with Brexit and Turkey because of an obvious exposure to the Eastern European conflict and questionable monetary policies), in Europe the larger countries are trudging along. 

Germany, France, and Italy above all are not doing well. Italy, for example, has inflation at 9% in line with the European figure, but much more worrying when we consider the third largest public debt in the world and employment at an all-time low. 

BREAKING: 🇮🇹 Italy's inflation reaches 9%, the highest ever recorded.

— Watcher.Guru (@WatcherGuru) August 31, 2022

The future of Italy and Europe

The debt-to-GDP ratio is over 150%, and Italy’s future is under attack from speculation by big investors who sniff the bargain of hitting a major struggling country that in their minds is just waiting to be shorted. 

It is precisely this trend that is growing. Many investors are speculating precisely on Italy by betting against the country that it could go into an Argentina-style situation. 

On Sept. 8, the ECB (European Central Bank) will meet in Brussels to deliberate what markets expect will be a rate hike between 50 and 75 basis points. Joachim Nagel, president of the Bundesbank, is also on the same page, saying:

“We need a vigorous rate hike in September. New steps are to be expected in the coming months.”