Closing the EU’s inflation governance gap The limits of monetary policy and the case for a new policy framework for shockflation

This report investigates how the EU should deal with shockflation - inflation unleashed by shocks to systemically significant prices such as energy and food. We argue that the ECB’s monetary policy is not an adequate instrument to deal with this kind of inflation. Therefore, the EU currently lacks adequate governance structures. The EU should develop a new inflation governance framework that targets shocks to systemically significant prices directly, before they are propagated through the economy. This document was provided/prepared by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee.