Philip R. Lane, a member of the ECB Executive Board, notes that the energy shock will last longer than expected and that inflation will not return to target until mid-2027.
The European Central Bank (ECB) expects inflation to remain above its target for longer than anticipated a few months ago. The reason is the second wave of energy price increases, affecting both oil and gas. This is explained by Philip R. Lane, a member of the ECB Executive Board, in an interview published on September 22, 2026 by the Swiss media Le Temps, as reported by the institution on its website.
Lane traces the origin of the problem to the first spike in energy prices in March and April of this year, followed by a brief optimism after the signing of the Memorandum of Understanding between the United States and Iran on June 17 to end the conflict. However, the war continued, and now a second surge in prices is observed, not only for oil but also for gas.
For this reason, the ECB indicated on September 10 that the energy shock will last longer than previously thought in March. At that time, markets expected the peak to occur around June and that the second half of the year would bring a recovery. Although there was a temporary improvement in the summer, geopolitical risks have risen again. The consequence, according to Lane, is that inflation will be higher for a longer time before returning to target from mid-2027.
The interviewee clarifies that, so far, between February and the date of the interview, there has been no pressure on the prices of other goods such as electricity or services. However, he warns that the second energy wave will put upward pressure on food, energy in general, including electricity, and goods, while pressure on services remains contained.
“If the shock turns out to be greater and more persistent this autumn, that will slow down the economy,” Lane states.
Despite this scenario, the ECB member points to positive factors if the energy shock does not worsen. He mentions public spending in some parts of Europe, such as the German infrastructure and defence package and the Next Generation EU programme. He also notes that, although Europe is not at the centre of artificial intelligence activity, there are enough European companies involved in this field for the economy to benefit. His baseline scenario is that the European economy continues to grow at a steady but modest pace, as long as the energy shock does not intensify.
Regarding when the crisis will be resolved, Lane acknowledges that the ECB is not an expert in political science and shares the general uncertainty. He explains that his baseline scenario reflects the market view captured in the price of oil and gas, whose futures curve points to a resolution by the end of this year. Normality will not return, but there will be some improvement compared to the current situation, although with much uncertainty surrounding that scenario.
As for additional public spending and the potential increase in debt, Lane believes that Germany has the necessary fiscal space for that outlay. The Next Generation EU programme is specific European funding, so it does not raise the same concerns about debt sustainability. However, he emphasizes that the boost from public spending is temporary and will fade over time.
The ECB published the full interview on its website on September 22, 2026, with the interview conducted on September 15.
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