What were the drivers of euro area food price inflation over the last two years?

Food price inflation was one of the main contributors to the strong rise in euro area headline inflation in 2022 and to the period of disinflation that followed. An extraordinary surge in energy costs was the main factor behind higher consumer food inflation in 2021 and 2022. Increases in global food commodity prices and euro area farm gate prices also contributed significantly. In the high inflation environment, domestic factors – such as wage and profit developments – have gradually emerged as increasingly important factors in keeping food inflation elevated. The exceptional, largely externally driven shocks to energy, global food commodity and euro area farm gate prices are fading, and this is expected to contribute to a moderation in food inflation in the course of 2024. However, strong wage growth implies only a gradual unwinding going forward. JEL Classification: E31, Q02, Q43