The energy crisis is threatening to increase the euro area’s energy bill many times over. This will impede growth in the euro area economy in the near term. Besides energy prices, the prices of other products too have climbed sharply.
The surge in inflation has prompted central banks to normalise their monetary policy. This means they are tightening financing conditions by raising key interest rates.
The euro area imports a major share of the energy it consumes. Research shows that abrupt changes in import prices lead to rapid increases in consumer prices but affect the real economy more slowly.
Monetary policy tightening will continue so that price stability can be safeguarded. Managing the energy crisis and keeping wage increases at a moderate level are key factors for the euro area’s price and growth outlook.
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