Societe Generale economists are warning that euro area inflation pressures may intensify as indirect effects from the energy crisis have yet to materialize in food and goods prices. Analysts Sam Cartwright, Michel Martinez and Jorge Garayo highlighted that while energy costs have surged, the downstream impact on broader consumer categories remains pending. This suggests inflation could prove stickier than current data indicates, as businesses typically pass through elevated energy costs to consumers with a lag. The assessment comes as markets closely monitor European Central Bank policy decisions and inflation trajectories across the eurozone.
Traders should brace for potential upside surprises in upcoming euro area inflation prints, particularly in food and core goods sectors. This delayed transmission could complicate the ECB’s efforts to normalize monetary policy and may support a more hawkish stance than currently priced into rate markets. The lagged effects also present risks for consumer-facing companies operating on thin margins.
FXnCO Insight
Position for higher-for-longer euro area inflation as energy shock passthrough to food and goods prices remains incomplete, supporting sustained ECB hawkishness.
Source: FXStreet