The European Central Bank announced that the significant rise in oil and gas prices will keep the prices of goods and services elevated for a longer period. Philip Lane, the chief economist of the European Central Bank, stated that inflation in the Eurozone is expected to approach the target rate of 2 percent only around the middle of next year.
Impact of Oil and Gas Prices on Inflation
Lane emphasized in an interview with a Swiss newspaper that the second wave of energy price increases may lead to higher and more persistent inflation rates, which are expected to continue until mid-2027 before decreasing towards the target rate of 2 percent. He added that so far, the spillover of rising oil and gas prices to other prices, especially electricity prices, has not been observed; however, this spillover may become evident in food prices in the future.
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Fuel Price Situation and Concerns in the Eurozone
Concerns are rising among Eurozone countries as the increase in gasoline and diesel prices to double-digit rates has raised serious worries about service prices. Retail fuel prices in the European Union are at their highest historical levels, with gasoline prices increasing by an average of 29 percent since February, and diesel prices rising by up to 40 percent.
The European Central Bank predicts that diesel prices will peak by October, but given supply constraints and the potential export ban on this fuel by the United States, these predictions may be optimistic. The energy inflation rate in the Eurozone reached 14.3 percent in August, and this rise in fuel prices could put additional pressure on food and goods prices overall.
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