The euro area is net importer of energy. Therefore, the scale of the energy price changes we are facing – up around 40% in the last year– constitute an unprecedented terms of trade shock for the euro area. We are all significantly worse off as a result.
Some groups in society are more affected, especially those for whom energy and food account for a greater share of spending. We know that lower income and older households are particularly vulnerable, something I return to in the policy discussion below.