European Central Bank Chief Economist Philip Lane has signaled that the latest surge in energy prices will keep eurozone inflation elevated for a longer stretch than the central bank initially projected. "We are witnessing a second wave of price increases, affecting not just oil but also natural gas," he said in an interview on Tuesday. "Our assessment is that this energy surge will push inflation higher and make it more persistent, before it gradually retreats toward our target starting from mid-2027."

Lane elaborated that the current "second round of energy price spikes" is expected to exert upward pressure on food costs, broader energy prices including electricity, and overall goods prices. In contrast, he noted that price pressures in the services sector should remain contained.

Following a surge in energy costs linked to the conflict in Iran, the ECB implemented its second rate hike this month. Since then, policymakers have begun laying the groundwork for additional tightening, with a potential 25-basis-point increase as early as October. In the coming months, eurozone inflation is projected to climb to roughly 4%. The ECB's latest forecasts peg average inflation at 3% this year and 2.5% next year—both significantly above the 2% target.

Meanwhile, the economy continues to demonstrate resilience. Lane remarked, "If the shocks this autumn prove more severe and sustained, they will weigh on economic growth." However, he added, "If the shocks turn out to be less severe, several positive factors should support expansion, such as the substantial public spending initiatives in parts of Europe." He specifically cited Germany's infrastructure and defense investment plans, as well as the European Union's NextGenerationEU program.

He also emphasized, "Although the epicenter of AI activity is not in Europe, we still have a sufficient number of firms active in that field, so our economy can benefit as well." Lane concluded, "Our baseline scenario is that, as long as the energy shock does not intensify, the European economy should continue to grow at a steady but moderate pace."