ECB Blames Energy Crisis for Inflation Hike

The European Central Bank (ECB) has released new research indicating that the current spike in euro zone inflation is largely driven by higher energy prices. This justifies the ECB's small interest rate hike in June, which was the first increase in nearly three years.

According to the research, conducted by economists Kristina Barauskaitė Griškevičienė and Claus Brand, the current bout of high inflation has been almost entirely driven by adverse energy supply shocks. This contrasts with the 2021-22 period of high inflation, which was also influenced by monetary stimulus at first and fiscal stimulus later on.

The ECB is set to raise rates again next week due to continued disruption to gas and petrol prices in the euro zone. The research suggests that the current policy response is consistent with the medium-term orientation of the ECB's monetary policy and financial market expectations.