Rising gas prices will hit Spain hardest

The upward pressure on euro-zone headline inflation from the surge in natural gas prices will not be felt evenly throughout the region, with Spain looking most vulnerable. Governments are stepping in to cushion the blow, but higher energy bills are a downside risk to the euro-zone’s consumer recovery.
Jessica Hinds Europe Economist
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European Economics Weekly

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In contrast to those at the US Fed, ECB policymakers are not ready to retire their argument that the current bout of high inflation is temporary. This reflects the significant difference in inflationary pressures between the two economies. Next week, we will get the detailed breakdown of November’s German inflation data, which will shed more light on the stronger-than-expected outturn. Meanwhile, with less than two weeks to go until December’s ECB meeting, the Governing Council appears to have reached a consensus on some aspects of its asset purchase programmes. But comments from Christine Lagarde today suggest that it will avoid making any long-term commitments.

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European Data Response

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The recent surge in the prices of natural gas and coal, and therefore electricity too, has boosted energy inflation and suggests the risks to our near-term forecast for headline inflation lie to the upside. But the effects of this will start to fade next spring and, in any case, will have next to no bearing on core inflation.

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7 September 2021
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