ECB: Rising Natural Gas Prices Will Transmit to Inflation More Quickly
nashnova research
The ECB said Monday that wholesale gas price swings now reach retail inflation significantly faster than in 2022, with over half of eurozone members seeing pass-through within one to three months — though rising renewable-energy share is softening the impact on electricity prices.
How much faster is the pass-through?
In over half of eurozone member states, wholesale gas price moves now reach retail gas inflation within 1–3 months — markedly quicker than in 2022.
The share of countries reporting a pass-through lag of 13–24 months dropped from roughly 40% in 2022 to about 5%.
This means → a gas price spike that once took a year to show up on household bills now lands within a single quarter.
Why has pass-through accelerated?
After the Russia-Ukraine conflict, Europe's gas market liberalised faster: pricing became more flexible and fixed-term contracts shortened.
In plain terms = many households used to lock in long-term price contracts, so wholesale surges were delayed; now contracts are shorter and retail prices track wholesale moves almost in real time.
One offset: the rising share of renewables — wind, solar, and other non-fossil sources — means gas price swings hit electricity prices less hard, because power generation relies less on gas.
Where do gas prices stand now?
European wholesale gas prices are up more than 140% year-on-year.
Two supply-side pressures: the Iran conflict is constraining global gas supply, and European storage levels remain low.
This means → upside risk to prices is still building, not peaking.
What does this mean for ECB policy?
Eurozone inflation already exceeds 3%, above the ECB's 2% target; some economists expect it to reach 4% by year-end.
The ECB has already raised rates twice in a row; faster gas pass-through reinforces market expectations of further tightening.
In plain terms = gas costs reach consumers faster → inflation figures are harder to bring down → the central bank faces more pressure to keep hiking.
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