• There is a lot of discussion about inflation and the drivers of current reflation trends, but little attention has been given to the exaggerated base effects caused by the pandemic.

• Chart 1 shows the new Eurostat weightings for items in the consumer prices basket for 2021 to account for current household spending patterns.

• Chart 2 shows that the current surge in headline inflation is being driven by households spending more on food and energy.

• The two charts suggest that the spike in inflation that we are likely to see across the region in the coming months is likely to be temporary and to level off later this year; this assumption underpins our view that monetary policy will remain accommodative across most of the region throughout 2021.

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