Prospects for monetary policy one year into the war in Ukraine

24 February 2023 marked one year since the start of the Russian invasion of Ukraine. Before the war, starting in 2021, the euro area was experiencing inflationary pressure attributed to supply-side factors, in particular to pandemic-related supply chain disruptions. The war in Ukraine amplified inflationary pressures through energy and food prices, later feeding into goods and services inflation. Later in 2022, the relative contribution of demand-side factors became more prominent. With the recent easing of energy prices, headline inflation is slowing down while core inflation continues to increase. Four papers were prepared by the ECON Committee’s Monetary Expert Panel, analysing current inflation dynamics and the inflation outlook. This publication is provided by the Economic Governance and EMU Scrutiny Unit (EGOV) for the Committee on Economic and Monetary Affairs (ECON), ahead of the Monetary Dialogue with ECB President Christine Lagarde on 20 March 2023.

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The paper was prepared within the framework service contract which is intended to support the work of ECON in the European Parliament by enabling it to seek independent expert advice in the field of monetary and economic affairs to support its scrutiny activity, in particular in the context of the Monetary Dialogues between ECON with the European Central Bank (ECB). Expertise is requested on a wide range of issues relevant to the work of ECON in relation to EU economic and monetary integration, including governance and institutional aspects, as appropriate.