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ECB: Faster Pass-Through of Gas Price Surge to Eurozone Inflation
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The European Central Bank (ECB) stated in its September 21 Economic Bulletin that surging natural gas prices are likely to transmit to eurozone inflation more quickly than in the past, though the impact on electricity costs will be tempered by growth in renewable energy generation. Wholesale gas prices have risen over 140% year-on-year, driven by the Iran war constraining global supply and low European storage levels increasing the risk of further price increases. Since the 2022 Russia-Ukraine conflict reduced supply, the European gas market has become increasingly liberalized. The ECB noted that subsequent changes, including more flexible pricing and shorter fixed-term contracts, mean retail prices will also react faster. A survey of euro area central banks found that in more than half of eurozone countries, changes in wholesale gas prices now transmit to gas inflation within 1-3 months, an acceleration from 2022. About one-tenth of countries report a transmission time of 4-6 months, and one-third report 7-12 months. The share of countries reporting slower transmission of 13-24 months has fallen from about 40% to roughly 5% since 2022.
Source report
September 21 – The European Central Bank (ECB) stated in its Economic Bulletin on Monday that surging natural gas prices could feed through to euro area inflation faster than in the past, though the impact on electricity costs is expected to be smaller due to the growing share of renewable energy generation.
Wholesale natural gas prices have risen more than 140% year-on-year, driven by constrained global supply linked to the conflict in Iran and heightened risk of further price increases due to low inventory levels in Europe.
Since the Russia-Ukraine conflict in 2022 reduced supply, Europe's natural gas market has become increasingly liberalised. According to the ECB, subsequent changes—including more flexible pricing and shorter fixed-term contracts—mean that retail prices will also react more swiftly.
A survey of central banks across the euro area found that in more than half of eurozone countries, changes in wholesale natural gas prices now transmit to the natural gas inflation component within one to three months—an acceleration compared to 2022. In approximately one-tenth of countries, the transmission period is four to six months, while in one-third of countries it ranges from seven to twelve months. The share of countries reporting a slower transmission period of 13 to 24 months has fallen from around 40% to roughly 5% since 2022.
Source
domesticNeutral / independent
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ECB: Gas price surge transmits faster to eurozone inflation, renewables curb power impact