Recommended Free Tools
Euro area inflation risks have moved closer to the European Central Bank’s adverse scenario as energy prices rise, Olli Rehn warned on 2 October 2026. That is a warning about risk—not a forecast that the scenario will happen. The ECB’s September baseline still projected annual-average inflation easing to 2.1% in 2028, while its adverse and severe scenarios showed higher conditional outcomes.
What Rehn warned about
Rehn, governor of the Bank of Finland and a member of the ECB Governing Council, spoke at a conference of the European Systemic Risk Board. A Reuters-credited Investing.com report published on 2 October quoted him saying, “Higher energy prices bring us closer to the ECB’s adverse scenario in terms of inflation,” and that “Projections for growth and inflation continue to be subject to very high, pervasive uncertainty.”
The report said inflation had topped 3% in recent months and could approach 4% by year-end. That near-4% figure is the report’s estimate, not the ECB’s September baseline projection. The time frames and measures differ: the latest reported monthly reading, an estimate for later in the year, and the ECB’s projections of annual averages are not interchangeable.
Why energy costs can spread into inflation
- Energy prices rise directly. More expensive oil and gas lift energy inflation and raise household and business bills. The ECB reported that euro area annual HICP inflation rose from 2.9% in July to 3.3% in August 2026, driven by energy inflation linked to the Middle East conflict (ECB Economic Bulletin, Issue 6 (2026)).
- Businesses face higher input costs. Energy is used in production, transport and services. Firms may pass some of the increased costs on through prices for non-energy goods and services.
- Indirect and second-round effects may follow. Over time, higher costs can affect core prices and wage demands. In the ECB’s September adverse scenario, core inflation reaches 2.8% in 2027; in its severe scenario it reaches 3.5%.
- Demand can weaken at the same time. The shock reduces real incomes and can weigh on trade and domestic demand. Higher financing costs can further restrain demand, which may limit how broadly businesses pass costs on even as economic activity suffers.
The ECB’s September projections describe the initial effects of the alternative scenarios as coming mainly from higher energy costs and uncertainty, with effects later spreading through trade, domestic demand and core inflation.
Quick wins for a faster PC:
Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →#1 Best Overall
How the ECB’s baseline differs from its scenarios
The ECB’s September 2026 staff projections use technical assumptions with a cut-off date of 19 August. The alternative paths are illustrative, market-based scenarios—not predictions with assigned probabilities. The table compares their annual inflation and growth figures; the scenario results are conditional on their assumptions.
| ECB September 2026 path | Energy-price assumptions | HICP inflation, 2026 / 2027 | Core inflation, 2027 | Real GDP growth, 2026 / 2027 | Shock duration |
|---|---|---|---|---|---|
| Baseline | Baseline assumptions; scenario-specific figures not stated | 3.0% / 2.5% | Not stated | Not stated | Not stated |
| Adverse | Oil at USD 99 per barrel and gas at EUR 77 per MWh in Q4 2026 | 3.1% / 3.2% | 2.8% | 0.9% / 1.1% | Not stated |
| Severe | Scenario-specific figures not stated | 3.3% / 5.4% | 3.5% | 0.8% / 0.4% | Not stated |
The baseline annual-average HICP projections are 3.0% for 2026, 2.5% for 2027 and 2.1% for 2028. The adverse and severe figures are alternative scenario outputs, not revisions to the baseline. The adverse scenario assumes oil and gas prices close to the levels shown in the table for the fourth quarter of 2026; the ECB describes its alternatives as illustrative and market-based.
Rank #2
- Ideal for Gifting
- Ideal for a bookworm
- Compact for travelling
Could higher borrowing costs limit inflation pass-through?
Potentially, but that would not make the shock harmless. Rehn’s warning, as reported, was that higher long-term borrowing costs might constrain the pass-through of energy costs into other prices and wages. More expensive credit can cool spending and investment, reducing firms’ ability to raise prices. At the same time, it weighs on growth, households and businesses.
The ECB’s 30 September speech said oil and gas prices had moved closer to the adverse scenario since the projections’ 19 August technical cut-off. Rehn’s 2 October remarks therefore came after those assumptions were set; they did not mean the ECB had replaced its baseline with the adverse path.
What could change the outcome
- Whether energy prices continue rising or retreat, and how conflict developments affect supply and markets.
- How much firms pass higher costs into non-energy prices, and whether wages and core inflation respond later.
- How financial conditions affect demand, growth and the scope for pass-through.
Those uncertainties are why the ECB’s scenarios are useful for showing possible paths, but should not be read as certainties. The near-4% year-end estimate in the report is also distinct from the ECB’s annual-average baseline figure for 2026.
Quick Recap
Best Value
- It can be a gift option
- Comes with secure packaging
- Helpful in various ways
Rank #4
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
