It has also triggered some pass-through to other goods and services: it is estimated that a 10 pp increase in food commodity prices ultimately has a 0.4 pp impact on headline inflation (HICP) after one year. 7. Underlying inflation has risen significantly, amounting to 4.9% in August in Spain (4.3% in the euro area). In August, 43% of items saw inflation of more than 4% (over 50% in the euro area). In Spain the contribution to this increase was particularly high in the case of restaurants, cafés and the like, accommodation services and motor vehicles.5 “Recreation, hospitality and tourism” contributed 1.6 pp to headline inflation in Spain, compared with 1.1 pp in the euro area.6  1  For instance, at the end of summer 2021 gas prices and, therefore, electricity prices, were expected to correct downwards sharply from spring 2022. However, according to the futures market, this correction is now not expected until 2023. 2  See J. M. González-Mínguez, S. Hurtado, D. Leiva-León and A. Urtasun (2022). “De la energía al resto de componentes: la generalización del fenómeno inflacionista”, Artículos Analíticos, Boletín Económico, Banco de España, forthcoming. 3  Fertilizer and natural gas prices are very closely related. In addition, the war has represented a further shock to agricultural commodities, as Russia and Ukraine account for high shares of the corresponding international markets. 4  This behaviour does not differ from that observed in prior episodes of rising prices, such as the 2008 global food price crisis.
This highly uncertain setting is also reflected in the dispersion among experts in the oneyear economic outlook for the euro area. This dispersion is very high in the case of GDP – close to the levels observed in the 2008 financial crisis – and stands at an all-time high in the case of the one-year inflation outlook. 3. The role of economic policy In response to the inflationary episode, the ECB has accelerated the process of normalising its monetary policy The sharp rise in inflation prompted the ECB to respond by embarking on a process of monetary policy normalisation in late 2021. In March we discontinued net purchases under the pandemic emergency purchase programme (PEPP). On 1 July, once the conditions set out in our forward guidance had been met, we brought an end to the net purchases under 7  the asset purchase programme (APP). In late June, we raised interest rates by 50 basis points (bp), thereby exiting negative territory for the first time since 2014. September saw a further increase of 75 bp, the biggest hike in the history of the euro. In July we also approved a new instrument, the “Transmission Protection Instrument” (TPI). Subject to fulfilling the criteria established, under the TPI we will be able to make secondary market purchases of securities issued in jurisdictions experiencing a deterioration in financing conditions not warranted by the economic fundamentals, to counter risks to the monetary policy transmission mechanism to the extent necessary.