The European Central Bank published an Economic Bulletin article using its Consumer Expectations Survey to examine how the 2021-23 inflation surge and subsequent interest rate increases translated into distributional outcomes in the euro area. It finds that standard indicators of income, consumption and wealth inequality remained broadly stable between 2022 and 2025, even as public perceptions of rising inequality increased sharply, with cost-of-living pressures seen as the main driver. In the August 2025 survey wave, 73% of households reported that inequality had increased since 2021, while 5% thought it had decreased; 93% of respondents attributed the perceived increase to higher living costs, and 84% selected inflation as the single most important factor. Over the same period, disposable income inequality edged up only slightly (Gini coefficient from 0.33 in 2022 to 0.34 in 2025) and consumption inequality similarly rose marginally (0.31 to 0.32), while the at-risk-of-poverty rate moved from 20.3% to 20.7%; net wealth inequality increased mildly, with the Gini coefficient up by about 0.02 points between 2022 and 2024. The analysis constructs household “personal inflation” rates from CES consumption baskets and shows that inflation burdens differed meaningfully by income: at the October 2022 peak, lower-income households faced higher inflation than higher-income households by 0.55 percentage points, and the cost of inflation in 2022 was 12.28% of current income for the lowest quintile versus 5.69% for the highest. On interest rates, lower-income mortgagors were more exposed to repricing through greater use of adjustable-rate mortgages and shorter fixation periods, and a microsimulation suggests higher post-repayment income inequality for mortgagors as higher rates fed into repayments, with the unequal distribution of interest rate risk offsetting the fact that higher-income households hold a larger share of mortgage liabilities.
European Central Bank 2025-11-12
European Central Bank research finds perceived inequality surged during 2021-23 inflation despite broadly stable measured inequality
The European Central Bank's Economic Bulletin article examines the 2021-23 inflation surge and interest rate hikes' impact on euro area inequality, finding standard indicators stable despite public perceptions of increased inequality. The study highlights that lower-income households faced higher inflation burdens and were more exposed to interest rate repricing, leading to increased post-repayment income inequality among mortgagors.