ECB Warns Food Prices Could Become Major Driver of Inflation Across Europe in 2027

Brussels: Food prices are likely to become a major driver of inflation across Europe next year, European Central Bank (ECB) Chief Economist Philip Lane has warned, as rising commodity and energy costs continue to put pressure on household budgets.

Lane said food inflation is expected to increase during 2027, with the sharpest price pressures potentially emerging in the summer. His comments come amid renewed volatility in global energy markets, with oil prices recently rising above $90 a barrel as efforts to end the conflict involving Iran failed to produce a breakthrough.

Although food inflation across Europe remains relatively moderate at present, prices of key commodities such as wheat, maize and rice have increased in recent months.

Lane warned that higher energy costs, including oil and gas prices, could further feed into food prices. Weather-related events, including potential disruptions associated with El Niño, could add to the pressure on agricultural production and global food supplies.

Inflation is currently above the ECB’s 2% target, with the euro-area outlook remaining highly dependent on developments in energy markets and the broader global economy.

Lane said future interest-rate decisions would continue to be guided by the ECB’s assessment of what is necessary to bring inflation sustainably back towards the 2% target.

Targeted support urged

Lane also called for government support measures to be carefully targeted at households most affected by rising costs.

He argued that subsidies should be temporary, targeted and focused on those most in need, rather than becoming permanent measures that also benefit households that do not require financial assistance.

The warning is particularly relevant as governments across Europe face growing pressure to support households while maintaining control over public finances.

Lane highlighted several areas that are expected to place increasing pressure on public spending, including population growth, climate change, defence and investment in artificial intelligence.

He stressed the importance of maintaining fiscal discipline and warned that governments could face difficulties if public spending continues to rise without a sustainable increase in tax revenues.

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