Robert Holzmann has posed a very important question: what are the drivers of the very high inflation rates that we see today? It has been over a year since the euro area economy has been hit by a sequence of supply shocks -including successive waves of the pandemic-- that have pushed up inflation.
We have seen a spike in fuel prices and a series of supply disruptions caused by the pandemic, which raised energy and commodity prices further. While the euro area economy was just recovering from the pandemic earlier this year, it was hit by another major shock stemming from the outbreak of the war in Ukraine and the associated sanctions.