By Marta Vilar – MADRID (Econostream) – European Central Bank Chief Economist Philip Lane said on Thursday that even if the current energy shock began to reverse, its second-round effects would continue to weigh on the economy “for a while.”
In a fireside chat at the conference Monetary Policy from New Perspectives organized by the Bank of Japan in Tokyo, Lane said the rapid and substantial decline in global oil supply had been “masked until now by inventories.”
“Even if the initial energy shock starts to reverse, the second-round [effects] will be with us for a while,” he said.
Lane said policymakers could draw lessons from previous energy shocks, noting that higher energy costs could cause inflation to rise abruptly and generate non-linear effects.
“But it's not the same non-linearity we had four years ago,” he said referring to the energy shock arising from the Russian invasion of Ukraine in 2022.
Central banks needed to ensure that “there’s no persistent belief in the population or among price-setting sectors that inflation is going to be too high for too long,” he said.
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