Theory suggests inflation risk premia are positive when supply shocks are expected to dominate demand shocks and negative otherwise. We measure these beliefs using demand and supply narratives derived from inflation news via Causality Extraction, which identifies causal relations between inflation and its drivers. Using narrative extracted from inflation news from the Financial Times for the Euro Area and the Wall Street Journal for the US, our key variable, NetDemand, measures the difference in articles attributing inflation to demand versus supply factors.

We construct a novel bank-level index that quantifies fragmentation in the capital buffer framework faced by euro area banks. Defined at quarterly frequency, it measures fragmentation by looking at the number of simultaneously active buffers, their geographical dispersion, and the frequency of buffer rate changes within the preceding year. The index is orthogonalised with respect to the level of capital requirements, bank size, and the financial cycle, thus controlling for these factors when measuring fragmentation as defined above.

The sharp rise in energy prices in the first half of 2026 evoked memories of the 2021-22 energy price shock. However, the 2026 energy price shock has so far been smaller in scale. This reflects more limited growth in wholesale gas prices and an increased share of electricity generated from renewables, which has dampened the pass-through of gas prices to wholesale electricity prices. The transmission of wholesale prices to retail prices has also changed, becoming somewhat faster for gas prices.

Malcolm Gomersall says new structure will improve audit quality due to increased scrutiny