Research by the European Central Bank: Controllable price shocks may amplify localized effects, leading to uncontrollable inflation.

Research from the European Central Bank has found that if a relatively manageable price shock affects closely connected networks of businesses, it could trigger a large-scale inflation event. European Central Bank economist Anton Nakov and Barcelona Institute of International Economics researcher Michel Gasib wrote in an article published on the ECB's official website on Tuesday that this is because shocks can create chain reactions through supply chains. They pointed out that when the shock is significant, these chain reactions can disproportionately magnify. Major disruptions could affect the entire economy sector. This finding helps explain why the conflict between Russia and Ukraine led to a sharp increase in energy costs, causing the Eurozone inflation rate to rise above 10%. ECB officials at the time underestimated the impact on prices.