EU to raise inflation forecasts as officials prepare for a permanent cut to Russian gas

EU officials said their inflation forecasts will be revised upwards, but they do not point to a recession yet.

The euro zone economy is expected to face higher inflation this year and in the years to come, according to officials.

Europe has been under intense pressure since Russia invaded Ukraine, with higher energy costs pushing up inflation. New forecasts point to an upward revision in consumer prices across the bloc, which is unlikely to change anytime soon.

Valdis Dombrovskis, executive vice president at the European Commission, told reporters that economic growth is proving resilient this year, still one can expect some downwards revision and even more so for the next year.

Inflation is going to be revised upwards because it continues to surprise on the upside.

New economic forecasts will be presented by the European Commission.

In May, the institution projected a growth rate of 2.5% for the EU and 2% for the euro area.

In terms of inflation in the euro area, the commission said it would hit 6.1% in the year 2022.

The European Central Bank is expected to raise rates next week.

Bruno Le Maire, France's economy minister, said over the weekend that Europe needed to prepare for a cut-off of Russian gas supplies.

According to energy analysts, the risk of a temporary interruption is high as Russian gas flows have already dropped by over 50% in the last few months.

The working assumption does not include a cut in Russian gas supplies. This is a risk that we can't exclude.

European Union member states are also preparing for this eventuality, according to Dombrovskis.

Next week, the commission will give suggestions for how EU countries should prepare for the winter.

Europe has been dependent on Russian gas supplies for a long time. In Germany, natural gas is used as a raw material in chemical factories.

Paolo Gentiloni, Europe's economy commissioner, told CNBC on Monday that supply cuts and real shortages of supply could change the situation.

The commission said in May that a cut in Russian gas supplies would cause an economic contraction on a quarterly basis in 2022, but that annual growth would still be positive.

The situation didn't change for the better.

Concerns that Russia could stop sending gas to Europe via theNord Stream 1 caused gas prices in Europe to go up and down on Monday.

The Baltic Sea-to-Russia pipeline was closed from Monday to July 21 for yearly maintenance. Concerns have been raised that Moscow may not restart supplies once the work is done.

It is hard to say what Russia will do after that date, according to the Economy Ministry of Germany.

The Nord Stream 1 pipeline, through which Russian natural gas has been flowing to Germany since 2011, will be shut down for around 10 days for scheduled maintenance work.

A permanent cut to Russian gas supplies poses a significant risk according to Ireland's finance minister.

Donohoe pointed out that 12 EU economies were currently being affected by fewer gas supplies.

Building up our capacity for gas storage is one of the steps being taken. In the medium term, there are alternative sources of energy. He said that they have done this for a long time.

The invasion ofUkraine sheds light on Europe's dependence on Russian fossil fuels.

The commission has a plan to stop dependency but it will cost a lot as governments invest in other energy production sources and look to make deals with other gas suppliers.

European Commission President Ursula von der Leyen stated in June that Russian gas imports were down by a third over the course of a year.