By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member and Austrian National Bank Governor Martin Kocher said the current energy shock could result in temporarily higher inflation, but that the overshoot must be brief and inflation should return to target "within about a year."

"The risk of inflation is higher than it was a few months ago," Kocher told the Financial Times following Thursday's ECB interest rate increase, pointing to continuing Middle East tensions and elevated energy prices.

Kocher said monetary policy would need to respond appropriately if energy prices moved significantly higher.

"If oil and natural gas prices move more towards the adverse scenario, then ... monetary policy would have to take those developments into account," he said.

Kocher said central banks could not prevent the initial inflationary impact of an externally driven increase in oil prices.

"Monetary policy obviously cannot influence oil prices," he said, adding that Europeans would "have to live with somewhat elevated inflation in the short term".

However, "this period has to be short," he said, and inflation would need to return to the ECB's target "within about a year".

"We must do everything we can to achieve our inflation target," Kocher said.

He declined to signal what the ECB might do at its October meeting, saying it was "too early to say anything about" the policy stance then, "let alone" at the December meeting.

Kocher said it was impossible at present to know "what the situation will look like in October," noting that market expectations for interest rates had changed rapidly in previous episodes.

He said the ECB's decisions would continue to be influenced by elevated and increasing inflation risks "unless there are surprising developments".

Kocher said there was no clear evidence so far that the increase in energy costs was spreading into broader price or wage dynamics, but warned that the likelihood of such "second-round effects" would increase if Middle East tensions and high energy prices persisted.

"We are watching this extremely closely, in particular the trends in wages and compensation per employee," he said.