High Inflation Presiding in the Euro Area

September 28, 2022


In August, inflation increased further to 9.1%, with food prices increasing by 10.6%. At 38.3%, energy price inflation remained incredibly high and once again accounted for the majority of overall inflation.

Though supply bottlenecks have been easing, higher input costs related to energy, disruptions of trade in food commodities and adverse weather conditions

continue to gradually feed through to consumer prices putting upward pressure on inflation, as is recovering demand in the services sector. The depreciation of the euro has also contributed to the build-up of inflationary pressures and price pressures are spreading across more and more sectors, in part owing to the impact of high energy costs across the whole economy.

According to the ECB staff macroeconomic projections for September 2022, headline HICP inflation is expected to remain above 9% for the rest of 2022 due to extremely high energy and food commodity prices, as well as upward pressures from the economy’s reopening, supply shortages, and tight labor markets.

The expected decrease in inflation from 8.1% in 2022 to 5.5% in 2023 and 2.3% in 2024 is primarily due to a sharp decline in energy and food price inflation due to negative base effects and an assumed decline in commodity prices in line with futures prices.

In 2024, headline inflation is expected to remain above the ECB’s 2% target. Relative to Eurosystem staff projections for June 2022, headline inflation has been revised up significantly for 2022 (by 1.3% and 2023 (by 2.0%), and slightly for 2024 (0.2%), reflecting recent data surprises, dramatic increases in wholesale gas and electricity price assumptions, stronger wage growth, and the euro’s recent depreciation.



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