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ECB official says oil and gas assumptions guide wartime scenarios

Philip R. Lane said the ECB has not seen very strong second-round effects so far, even as energy prices run higher than expected in its baseline.

Reported · Written up by our desk · Central Banks

Philip R. Lane, an ECB policymaker, discussed the central bank’s scenario work since the start of the Middle East war, saying the ECB has found it useful to lay out multiple cases for how the shock could unfold.

He said the ECB’s scenarios rely on different assumptions, including the price of oil and the price of gas, as well as the strength of second-round effects, how quickly energy prices would pass through to broader inflation and the economy.

Lane added that energy prices are higher than the ECB had expected in its baseline, but that it has not seen very strong second-round effects so far, while the ECB continues to monitor them.

He said it is too simplistic to label the current situation as only an adverse or baseline scenario, describing the scenarios instead as helpful illustrations for a comprehensive analysis.

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