ECB Sees Inflation Returning to Target from Mid-2027 Amid Energy Shock

European Central Bank (ECB) Chief Economist Philip Lane stated that inflation is likely to return to target from mid-2027. In a recent interview, Lane attributed this projection to an energy shock pushing up oil and gas prices. He noted that geopolitical risks are now elevated again.

Lane emphasized that the second wave of energy price increases will lead to higher and more persistent inflation before it recedes towards their target in mid-2027. He also mentioned that food, electricity, and goods prices may increase due to this energy shock, but services should remain relatively contained.

The ECB had previously anticipated a shorter duration for the energy price increases in March. However, Lane's latest comments suggest that the situation is more complex than initially thought.