ECB Links Energy Price Shock to Euro Zone Inflation Spike

The European Central Bank (ECB) has found that the current inflation spike in the euro zone is largely driven by higher energy prices, justifying its June rate hike.

A new research blog post by ECB economists Kristina Barauskaitė Griškevičienė and Claus Brand analyzed the current spell of high inflation, comparing it to the one that followed Russia's full-scale invasion of Ukraine in 2022.

The study found that almost all of the current increase in headline inflation has been driven by adverse energy supply shocks until the end of May this year.

This is in contrast to the previous bout of high inflation, which was also influenced by monetary stimulus at first and fiscal stimulus later on.