In a new blog post, the European Central Bank presents model-based analysis finding that the euro area’s 2026 inflation increase through May was driven almost entirely by adverse energy supply shocks linked to the Middle East conflict and the closure of the Strait of Hormuz. Headline inflation rose 1.5 percentage points from 1.7% in January to 3.2% in May, while monetary and fiscal policy exerted marginal downward pressure. The analysis contrasts this supply-driven episode with the 2021-22 inflation surge, when energy shocks, pandemic-related supply constraints, stronger demand and policy stimulus all contributed. Adverse energy supply factors accounted for about 90% of the increase in energy inflation from January to May 2026, while the ECB found no evidence of a euro area-wide demand boost from private investment potentially linked to artificial intelligence. The differing inflation drivers support the ECB’s more gradual and flexible, meeting-by-meeting policy response, compared with the forceful and persistent tightening that began in 2022.
2026-09-01European Central Bank
European Central Bank analysis finds energy supply shocks drove almost all of the 2026 inflation rise
European Central Bank analysis finds that adverse energy supply shocks drove almost all of the euro area’s 1.5 percentage point inflation rise between January and May 2026. Unlike the broad demand and supply pressures of 2021-22, the current episode supports a more gradual and flexible monetary policy response.