In a new blog post, the European Central Bank (ECB) examines why euro area food inflation is set to rise again as higher energy costs and extreme weather outweigh earlier favourable harvests and falling commodity prices. Food inflation eased from 2.6% in January 2026 to 1.1% in August before increasing to 1.3% in September. The post points to September 2026 ECB staff projections, which already foresaw food inflation reaching 3.4% in the third quarter of 2027 before declining. Higher energy costs are gradually passing through transport, fertiliser, packaging and processing costs, although food producer prices had not yet increased as of August. Fertiliser prices have also surged following the blockade of the Strait of Hormuz, reflecting both supply disruption and higher energy costs. Heat and drought are expected to affect food prices sooner, with staff estimates suggesting they could add 0.3-0.8 percentage points to euro area food inflation over the next year. September’s increase came entirely from unprocessed food, particularly vegetables. Forecasting models differ on the timing and strength of the increase but consistently point to higher food inflation during 2027. The expected peak remains well below that following Russia’s invasion of Ukraine, reflecting a smaller energy shock and weaker demand that could constrain cost pass-through. Slower inflation has not reversed the earlier increase in food prices, which remain around 30% above their level at the end of 2021. Although wages adjusted for overall inflation have recovered to their levels before the inflation surge, purchasing power measured against food prices has not. This persistent affordability gap helps explain why households continue to feel pressure from grocery bills despite the recent slowdown in food inflation.
European Central Bank assesses renewed food inflation pressures from energy costs and extreme weather
In a new blog post, the European Central Bank examines mounting energy and weather pressures on euro area food inflation, referring to September projections showing a rise to 3.4% in the third quarter of 2027. Heat and drought could add 0.3-0.8 percentage points over the next year, while higher energy and fertiliser costs are passing through more slowly. Food prices remain around 30% above their end-2021 level, leaving wages’ purchasing power for food below its level before the inflation surge.