Inflation on the Upswing - Just a Hiccup or a Trend Reversal After All?

13-09-2021

Although energy price volatility has recently been the largest contributor to movements in the headline inflation rate, there are other factors indicating that inflation in the euro area will remain elevated in the months ahead. However, most of them have only a temporary effect. A major risk to the further development of inflation is a rise in inflation expectations, which should be monitored critically. This paper was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 27 September 2021.

Although energy price volatility has recently been the largest contributor to movements in the headline inflation rate, there are other factors indicating that inflation in the euro area will remain elevated in the months ahead. However, most of them have only a temporary effect. A major risk to the further development of inflation is a rise in inflation expectations, which should be monitored critically. This paper was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 27 September 2021.

External author

Kerstin BERNOTH, Gökhan IDER