ECB Executive Board Member Philip R. Lane said a second wave of oil and gas price increases is extending Europe’s energy shock and keeping inflation elevated for longer than the ECB expected earlier this year. In an interview conducted on September 15 and published Tuesday, Lane said the March-April surge had initially been expected to peak around June before easing in the second half. Instead, geopolitical risks have risen again. “We expect the energy shock to last longer than we had anticipated in March,” he said, adding that inflation is now likely to remain “higher for longer” before falling back toward the ECB’s target from mid-2027 onwards.
Broader pass-through remains limited so far. Lane said the ECB had not yet seen a significant spillover from the energy shock into electricity or services prices between February and now, calling that “the good news.” But the renewed increase in energy costs changes the forward-looking risk. Lane expects upward pressure on food, electricity and goods prices, while pressure on services should remain contained. The distinction is important: the ECB is not describing an already broad-based inflation acceleration, but a longer-lasting energy shock that increases the likelihood of wider price effects over coming months.
Lane said the euro-area economy should continue growing at a “steady but modest pace” as long as the energy shock does not become more severe, with German fiscal spending, Next Generation EU funds and some AI-related investment providing support. However, “if the shock does turn out to be larger and more persistent this autumn, that will hold back the economy.” The ECB’s baseline assumes some improvement in the geopolitical situation later this year, but Lane stressed that this reflects oil and gas market pricing rather than an independent political forecast, warning that “there’s a lot of uncertainty around that baseline.”
Key Takeaways
- ECB Executive Board Member Philip R. Lane said a second wave of oil and gas price increases means Europe’s energy shock is lasting longer than the ECB expected earlier this year.
- Lane said inflation is now likely to remain “higher for longer”, before moving back toward the ECB’s target from mid-2027 onwards.
- Broader pass-through remains limited so far. Lane said there had not yet been a significant spillover into electricity or services prices, calling that “the good news.”
- The ECB nevertheless expects renewed energy pressure to feed into food, electricity and goods prices, while services inflation remains comparatively contained.
- Lane expects the euro-area economy to continue growing at a “steady but modest pace” if the energy shock does not worsen.
- German fiscal spending, Next Generation EU funding and some AI-related activity are supporting growth, but Lane warned that a larger or more persistent energy shock this autumn would weigh on the economy.
- The ECB’s baseline assumes some improvement in the geopolitical situation later this year, but Lane stressed that this reflects market pricing in oil and gas and carries substantial uncertainty.
