MNI BRIEF: Two-Way Inflation Risks From Energy Shock: ECB Lane

Addressing the issue of higher energy costs, European Central Bank Chief Economist Philip Lane said Monday it is necessary to take into account the "full macroeconomic implications" of adverse external shocks and supply shocks in the energy sector, "including the associated headwinds for the economic outlook and the negative wealth effect associated with a deterioration in the terms of trade."

Through these mechanisms, an energy price shock "can simultaneously raise headline inflation but exert downward pressure on the path of underlying inflation," Lane said in comments at the opening of the central bank's conference on monetary policy.