A decomposition of euro area macroeconomic uncertainty

The COVID-19 pandemic, followed by Russia’s war in Ukraine and the ensuing energy crisis, have led to a surge in macroeconomic uncertainty in the euro area. A newly developed indicator reveals that the recent bout of uncertainty is closely linked to price fluctuations in commodity markets and variations in consumer and producer prices. Elevated levels of uncertainty continue to pose a challenge for forecasters trying to predict future economic conditions and the trajectory of inflation.

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