Food prices could soar again in the euro zone in 2027, warns the ECB

Food prices could start to accelerate again in the euro zone next year, according to a blog note published Tuesday by the ECB, a politically sensitive signal particularly in France in full mobilization against the “high cost of living”.

“A double shock linked to energy and extreme weather conditions could revive tensions on food prices”, while the slowdown observed since the start of the year could only be temporary, write the authors of the blog note published by the monetary institution.

“It is still too early to consider that food inflation has lost its bite,” according to the authors of the note, Elena Bobeica, Gerrit Koester, Friderike Kuik and Christiane Nickel, who emphasize that the prices of bread, milk or chocolate continue to weigh heavily on households' perception of inflation.

Eurozone food inflation fell from 2.6% in January to 1.1% in August, its lowest level since mid-2021, before rising slightly to 1.3% in September.

“The food basket has become more expensive”

This lull can be explained in particular by good harvests in Europe last year and by the drop in international prices of agricultural raw materials, such as coffee, cocoa and sugar.

But several indicators upstream of the food chain show that pressures are forming again: on the one hand, the recent energy shock linked to the conflict in the Middle East is gradually spreading into the costs of transport, fertilizers, packaging and processing.

Then, extreme heat and drought affected crops at a critical time in the 2026 crop year, putting pressure on food supplies.

According to ECB staff estimates, weather effects alone could add between 0.3 and 0.8 percentage points to food inflation over the next twelve months.

The central bank now expects food inflation to rise to 3.4% in the third quarter of 2027 before falling again.

The fact remains that “the food basket has become more expensive”, remaining on average around 30% higher in the euro zone than at the end of 2021, which continues to erode the purchasing power of households for food expenditure, according to the note.

The ECB specifies that the opinions expressed are those of the authors and do not necessarily reflect the position of the institution.