Lane Sees Persistent Inflation as Energy Prices Continue to Soar

ECB Chief Economist Philip Lane believes an energy shock caused by rising oil and gas prices will have a lasting impact on inflation. According to Lane, this second wave of energy price increases is likely to lead to higher and more persistent inflation before it recedes towards the European Central Bank's target starting in mid-2027.

Lane noted that despite some upward pressure on electricity prices, services remain relatively contained from February until now. However, he warned that the current energy price increases are likely to put upward pressure on food prices and goods prices more broadly.

The ECB's March forecast anticipated a shorter-lived energy shock, but Lane sees geopolitical risks as elevated again. This has led him to revise his expectations for inflation, which is expected to return to target from mid-2027.