ECB Economist Sees Inflation Returning to Target by Mid-2027 Amid Energy Crisis

Philip Lane, chief economist of the European Central Bank (ECB), has stated that inflation is expected to return to target by mid-2027. This prediction comes as the energy shock, which pushed up oil and gas prices, is likely to last longer than anticipated in March. The second wave of energy price increases will lead to higher and more persistent inflation before it recedes towards the ECB's target.

Lane emphasized that there has been no spillover effect on other prices such as electricity or services, but the current energy crisis is likely to put upward pressure on food prices, energy prices more broadly, including electricity, and goods prices in general. However, pressures on services are expected to remain relatively contained.

The dominant issues are the war in the Middle East and the energy shock, Lane said. He also mentioned that government spending has had a temporary positive effect, and there may be a longer-term positive effect from Artificial Intelligence (AI). Lane believes AI will help raise living standards overall, but some occupations will suffer.