By Marta Vilar – FRANKFURT (Econostream) – European Central Bank Chief Economist Philip Lane said on Wednesday that, according to an ECB synthetic indicator, the energy shock linked to the Middle East conflict would now be classified as “medium-to-large” if assessed this week, compared with “medium” in the 11 March reading.
Speaking at the ECB Watchers’ Conference in Frankfurt, Lane said that the ECB would “be considering” at each meeting which scenario is most appropriate to address the situation.
He noted that markets expect elevated monthly inflation readings in March and April, followed by a return to more normal levels later in the year—suggesting investors view the shock as a one-off “price-level jump.”
Lane pointed to an ECB-developed synthetic indicator of energy commodity prices and thresholds for non-linear effects. As of 11 March, the shock was “on the edge of a medium shock,” he said.
“If I did it this week, I think it’s more like a medium-to-large shock,” he said. “But you need the second condition about how long it is going to last at that point.”
Lane said that understanding firms’ selling price expectations would be “very important.”
On wage developments, he said one could “have confidence” on the wage tracker being “a pretty good guide.”
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