ECB Chief Economist Philip Lane says wage and price adjustments from energy shocks create lasting inflationary pressures even if costs stabilize.
European Central Bank Chief Economist Philip Lane cautioned that inflationary pressures from the energy shock will linger despite potential price reversals. He emphasized that second-round effects, including wage hikes and firms protecting margins, continue to drive inflationary risks.
Lane noted that while the initial energy shock is fading, underlying supply constraints and inventory drawdowns mask persistent vulnerabilities. He warned of non-linear inflation spikes, where price increases exceed standard economic model predictions.
The ECB remains focused on preventing public expectations of permanently high inflation. Lane indicated the central bank may implement an “insurance” rate hike in June to counter these risks and stabilize price-setting behavior.