ECB Warns of Higher Inflation Due to Second Wave of Energy Price Increases

Philip R. Lane, a member of the Executive Board at the European Central Bank (ECB), discussed the ongoing energy crisis in an interview with Le Temps.

The ECB had initially anticipated the peak of the energy shock to occur in June, followed by a recovery in the second half of the year. However, due to geopolitical risks and a second wave of rising energy prices, Lane believes inflation will be higher for longer before falling back towards the ECB's target from mid-2027 onwards.

So far, there has been no significant impact on other goods, such as electricity, or services prices. Nevertheless, the ECB expects upward pressure on food, energy more broadly, including electricity, and goods in general due to the second wave of price increases.

The economy has shown resilience thus far but may be affected if the energy shock becomes larger and more persistent this autumn. Lane noted that there are positive elements for the economy, including government spending in parts of Europe, such as Germany's infrastructure and defence package and the Next Generation EU programme.