An intense El Niño event, driving record-high temperatures across Europe, could push inflation up by as much as one percentage point next year, according to a recent analysis by investment bank Jefferies. The meteorological phenomenon is expected to increase food prices in the UK and Europe by between 5% and 9%, complicating efforts by central banks to curb rising inflation.

El Niño, a natural climate cycle occurring every two to seven years that involves unusually warm sea surface temperatures in the Pacific Ocean, is known for triggering hotter weather globally. The current episode is an extreme case and has been a key factor behind Europe’s prolonged heatwave and dry conditions this summer.

Mohit Kumar, Jefferies’ chief European economist, noted that the inflationary pressures from the severe weather are likely to compound existing upward trends in commodity prices driven by geopolitical tensions, specifically the ongoing conflict between the United States and Iran. The combined effects could raise inflation by between 0.5% and 1% over the course of 2027.

The extreme weather has led to widespread crop failures across Britain and Europe, with farmers and retailers reporting this year’s harvest as the worst on record in many regions. These disruptions to food supply chains have already fueled concerns about rising consumer prices.

The situation has drawn the attention of central bankers, particularly members of the Bank of England’s Monetary Policy Committee (MPC), who have indicated they are closely monitoring the impact of the El Niño event on inflation as they prepare for upcoming interest rate decisions. Two MPC members have explicitly cited the meteorological developments as a factor influencing their outlook.

As the El Niño pattern continues to unfold, its influence on inflation dynamics and monetary policy will remain a critical area for policymakers and market participants.