ECB Blog: Energy Shock Drives Inflation Higher — Why Has Food Inflation Actually Declined?
From early 2026 to September, euro area headline inflation rose from 1.7% to 3.8%, while food inflation fell from 2.6% to 1.1%. ECB researchers explain this divergence: last year's good harvests and falling international commodity prices are still feeding through into consumer prices, while the current energy shock and extreme weather have not yet fully transmitted into food production costs. Compared with 2022, this shock is driven more by oil than gas, is smaller in magnitude, and demand is weaker, with food inflation's peak expected to be roughly one-fifth of the 2022 level.
From January to September 2026, euro area headline inflation climbed from 1.7% to 3.8%, driven mainly by energy commodity prices surging after the start of the conflict in the Middle East, which pushed consumer energy inflation to 18.9% in September. At the same time, food inflation fell from 2.6% in January to 1.1% in August, its lowest level since mid-2021, before edging up to 1.3% in September. This divergence creates tension with everyday experience at the supermarket: the rate at which food prices are rising has slowed considerably, although the level of food prices has still gone up overall.
ECB blog authors Elena Bobeica, Gerrit Koester, Friderike Kuik and Christiane Nickel explain this phenomenon in an article published on 20 October 2026. Last year, farm yields in Europe were generally good, with above-average harvests for crops such as cereals and oilseeds; prices on international markets for staples like coffee, tea, cocoa and sugar have fallen from their previously high levels. These factors have lowered euro area farm-gate prices, and their effects are still feeding through into consumer prices, keeping food inflation temporarily low.
However, several upstream indicators suggest that pipeline pressures on food inflation are building again. There is a time lag in the transmission of energy costs to food prices: energy affects food production directly, but higher energy costs also have a significant indirect impact, gradually spreading through supply chains and affecting transportation, fertilisers, packaging and processing costs. These indirect effects typically take several months to show up in consumer prices. Since the blockade was imposed on the Strait of Hormuz in 2026, producer prices of fertilisers have surged. Unlike the situation in 2022, the recent increase in fertiliser prices directly reflects disruption to supply as well as higher energy costs. As of August, producer prices for food had not yet increased significantly, because there tends to be a lag before they reflect changes in input costs.
Weather is the second factor driving food inflation at the current juncture. Extremely dry and persistently hot conditions across large parts of Europe in the summer of 2026 severely worsened prospects for agricultural supply at a critical stage of the growing season. ECB staff estimates point to an effect in the order of 0.3 to 0.8 percentage points on euro area food inflation over the next year, although the impact will vary across countries and products. Weather effects are likely to show up faster than energy effects, as weather acts directly on the supply of unprocessed food. In September, food inflation increased from 1.1% to 1.3%; this uptick came entirely from unprocessed food inflation, which rose to 4%, strongly driven by weather-sensitive vegetable prices. Processed food inflation, the larger part of the basket, went down slightly to just 0.4%.
The authors compare this shock with the 2022 episode. The 2026 energy shock is smaller in magnitude and so far driven more by oil and oil products than by gas. Oil price increases affect food prices through transport and other indirect costs, and these effects can take years to fully work their way through. Changes in wholesale gas prices take on average months to reach energy bills and longer still until they have fully passed through to food prices. Importantly, demand is less strong now than in 2022, which means it may be more difficult to pass higher costs on to food prices this time around. Taking all these factors together, the authors expect the peak in food inflation to be roughly one-fifth of that recorded after the start of Russia's war against Ukraine.
The recent ECB macroeconomic projections for the euro area, September 2026, see food inflation rising sharply to reach 3.4% in the third quarter of 2027, declining only after that. However, the authors note uncertainty around the outlook: new machine-learning models that also consider weather effects predict a more delayed reaction, while other short-term inflation projection models currently point to an even steeper increase than the latest ECB projections. What is common to all models is an expected increase in food inflation over 2027; the exact path will be shaped by how energy shocks and weather conditions unfold.
Falling food inflation does not mean the shopping basket has become cheaper. Food prices have risen more than other prices since 2022. To some extent this is normal, since over the long run food prices tend to rise slightly faster than others, but the gap that opened up between 2022 and 2025 was exceptional and persistent. Low food inflation over recent months closed a part — but not all — of this gap. Food prices in the euro area as a whole are around 30% higher than at the end of 2021, but this conceals a range from around 24% in Finland to around 48% in Estonia. When headline inflation is considered, real wages are back to their pre-inflation surge levels; however, when we look specifically at what wages can buy in terms of food, purchasing power is still below its pre-inflation-surge level. A Eurobarometer survey released on 22 September 2026 found that 55% of Europeans see reasonable food prices as a top EU priority.
The article notes at the end that the views expressed are those of the authors and do not necessarily represent the views of the European Central Bank and the Eurosystem. The authors acknowledge that the EU produces a part of the fertilisers it consumes, and that temporary support measures were approved in July to help farmers facing soaring fertiliser costs — mitigating factors that could cushion the impact. There are also regional discrepancies in weather effects: Western Europe was the region most severely affected by droughts and heatwaves over the summer, but in eastern Europe the picture was more mixed.