ECB: Wholesale gas prices to hit consumers faster

The European Central Bank (ECB) has indicated that the surge in wholesale natural gas prices is now translating into retail and electricity inflation in the Eurozone more rapidly than in previous periods. In its Economic Bulletin released on Monday, the ECB's economists highlighted that this faster pass-through is expected to be visible in inflation data within one to three months for most Eurozone members.

However, the economists also noted that the pressure on electricity prices has been less pronounced in 2026 compared to 2022. This moderation is partly attributed to a greater share of electricity being generated from renewable sources, which has lessened the typical strong correlation where gas prices act as the marginal price-setter for electricity.

The report comes as natural gas prices have doubled since the onset of the conflict in the Middle East, while oil prices have seen a more modest increase of approximately 40%. These soaring energy prices have reignited inflation concerns in Europe, particularly due to the spike in wholesale gas costs. Europe's efforts to build natural gas inventories for winter have been complicated by the Middle East conflict and increased competition for spot LNG supply from Asia.

The ECB has been actively managing inflation, having raised its key interest rate for the euro area in September by 0.25 percentage points, following a previous hike in June. Inflation remains above the ECB's long-term policy target of 2%, standing at over 3%. The central bank has cautioned that the economic outlook is highly uncertain, with potential upside risks to inflation and downside risks to economic growth.