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ECB sees second wave of energy price rises, lifting inflation outlook
ECB policymaker Philip R. Lane said markets now imply a longer energy shock and inflation that stays above target longer, with food, electricity and goods facing additional upward pressure.
In an interview with Le Temps, ECB policymaker Philip R. Lane said Europe has moved from an initial wave of energy price increases in March and April to a second wave, affecting not only oil but also gas.
Lane pointed to heightened geopolitical risks after the 17 June memorandum between the United States and Iran, saying the renewed energy pressure is why the ECB previously indicated on 10 September that the energy shock could last longer than expected earlier in the year.
He added that the ECB now expects inflation to be higher for longer before moving back toward its target from mid-2027 onwards, with upward pressure on food, energy more broadly including electricity, and goods, while pressure on services remains contained.
Lane said a more severe and persistent autumn energy shock would likely hold back the economy, though he cited potential supports from government spending in parts of Europe, including Germany’s infrastructure and defence package and Next Generation EU, as well as involvement of European firms in AI.