For central banks it poses a big problem when inflation is not "home made" but imported through higher energy prices. In this case inflation is not the result of a booming domestic economy but of external factors (political turmoil, peak oil, ...). Interest rate hiking be the central bank would be pretty ineffective except when it leads to a strengthening of the home currency.

Thanks to the ECB statistical Data Warehouse one can now easily download data on the contribution to the inflation rate (in percentage points) of various components of the harmonized consumer price index. Currently, 50% of the yearly inflation rate in the Euro area is due to higher energy prices even though energy only makes up 10% of the index.

The good news: Many people look at the price of oil as a crude proxy for energy prices. Though it is true that the variation in the crude oil price explains the variation in consumer energy prices very well, the "beta" is pretty low. Crude oil prices (in EUR) have increased 700% since 1999 whereas consumer energy prices have "only" increased 90%. Given that many market participants think that at current oil prices the price elasticity of demand is no longer negligible the pressure might abate.