The surge in natural gas prices and its consequences for Europe

Natura l gas prices have risen sharply over the last couple of months, breaking out of their historical price range. High gas prices reflect a variety of underlying causes , some of which will exert a lasting upward push. We consequently expect prices to stay around the €70 level throughout the winter, before moving back towards the €40 level. The high gas price is yet another headwind for the euro area that will slow growth and push inflation up. Because of the high gas price, we now see euro area headline inflation to decline again below 2% only by the second half of 2022. Some g overnments have already announced to shield the private sector, at least partially, from the record high gas prices. While there remains significant uncertainty about the extent and impact of these measures, they will nevertheless buffer the adverse effect, preventing a more severe slowdown of the euro area economy.