ECB warns of food inflation effects on eurozone

By Trend

Food inflation in the eurozone is likely to remain high due to the Russia-Ukraine crisis and the surge in global commodity prices, according to the European Central Bank's (ECB) monthly Economic Bulletin published on Tuesday, Trend reports citing Xinhua.

The significant increase in food inflation since mid-2021 has been driven primarily by the rise in international food commodity and energy prices, which was only accelerated by the Ukraine crisis, the bank said.

The strong repercussions of the crisis for the eurozone are explained by "its direct impact on production and export capacity in Ukraine and by trade restrictions and increased uncertainty in Ukraine, Russia and Belarus," the report said.

The ECB said it was concerned that access to certain food commodities, such as maize, oil seed, wheat and sugar, which the eurozone countries mainly import from the regions affected by the crisis, especially from Ukraine, is and will be negatively affected over the longer term.

Moreover, the eurozone "imports more than a quarter of its fertilizer from the affected region, which is difficult to replace from other sources."

"Differences in HICP (Harmonized Index of Consumer Prices) food inflation among eurozone countries may widen further going forward," since small open economies are more exposed to fluctuations in international commodity markets, the report said.