Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Inflation in Europe - Statistics & Facts
Economies across Europe faced a severe inflationary episode during 2022 and 2023, driven by the economic disruption of the COVID-19 pandemic as well as trade sanctions placed on Russia in response to its invasion of Ukraine. This trend began to decline between 2024 and the start of 2025, due to the European Central Bank’s sustained high interest rates as a policy aiming to fight the acceleration of prices. However, the outbreak of the U.S.-Israel war with Iran in 2026 caused new price hikes, worrying people already weary of rising costs of living.
What caused the 2022-2023 inflationary episode?
Inflation has multiple causes, but key drivers of Europe's recent surge include pandemic-related supply chain disruptions, and the pent-up consumer demand following the easing of restrictions , high energy prices, expansionary monetary and fiscal policies, labor market shortages, and price gouging in highly concentrated sectors. Additionally, inflation can be self-reinforcing as workers demand higher wages to keep up with rising costs. This, in turn, increases business expenses, which are then passed back on to the consumer in the form of even higher prices. In the Eurozone, real wage growth was negative from 2021 to 2023 but positive again in 2024 and 2025.
Russia's invasion of Ukraine in February 2022 triggered a surge in energy prices, as most European countries chose to boycott Russian oil and gas as a result of the invasion, previously their largest supplier of natural resources. Inflation reached its peak in October 2022, when the overall inflation rate for the EU was 11.5 percent and 11.1 percent for the UK, after which the trend began to ease across the European economy.
Disinflation and projections for 2025
Since the 2022–2023 inflationary episode, Europe has been experiencing disinflation, meaning reductions in the rate of price increases. This was a positive sign for the European economy after the initial price shock, while also getting closer to the European Central Bank's (ECB) inflation rate mandate of two percent. However, the disinflation process proceeded differently across the various sectors and countries that form the European economy.
Following a period of disinflation in 2024 and 2025, the outbreak of the U.S.-Israel war with Iran in February 2026 and the subsequent closure of the Strait of Hormuz risk causing another extended period of high inflation rates. Gasoline prices spiked around Europe, and electricity costs could rise as pressure on the global market impacts the European market. Moreover, the price of goods is likely to increase as transport costs rise. Projections made before the start of the war indicate that the ECB will lower its key interest rate between 2025 and 2027 and that inflation rates are likely to remain stable around two percent. Many European consumers thus remain wary as cost of living continues to be a major concern.
