The paper assesses the impact of the marked increases in energy prices in 2021-22 on inflation and economic activity in the euro area and analyses how the ECB's monetary policy affected the transmission to the main macroeconomic variables.
The results show that the sharp increases in energy prices over the period contributed significantly to the rise in inflation and led to a slowdown in euro-area real GDP. If the ECB had implemented a more restrictive monetary policy to counteract the effect of energy price increases on consumer prices, inflation and economic growth would have been much lower. If monetary policy had, on the other hand, countered only the indirect effects of energy price increases on consumer price increases, the adverse impact on growth would have been smaller.
