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ECB's Makhlouf concerned energy prices may stay higher for longer
Finance

ECB's Makhlouf concerned energy prices may stay higher for longer

Published by Global Banking & Finance Review

Posted on May 1, 2026

1 min read

· Last updated: May 1, 2026

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ECB's Makhlouf Warns Prolonged High Energy Prices Could Fuel Inflation

Concerns Over Energy Prices and Inflationary Effects

Makhlouf's Warning on Persistent High Energy Costs

DUBLIN, May 1 (Reuters) - European Central Bank Governing Council member Gabriel Makhlouf said he is concerned that energy prices may stay higher for longer without a clear timeline for the end of Middle East conflict and will be watching closely for knock on effects.

Monitoring Indirect Effects on Inflation

"I will be paying close attention to indirect effects, that is how higher energy prices are contributing to cost-push inflation in production, transportation, and services," Makhlouf said on his blog on the Irish central bank's website on Friday, a day after the ECB left interest rates but debated hiking them.

Wage Impacts and Inflation Expectations

"Potential second-round effects via wages will take longer to show up, given the staggered nature of wage-setting in Europe. In the meantime, inflation expectations need to be closely monitored for signs of de-anchoring."

Reporting Credits

(Reporting by Padraic Halpin; editing by William James)

Key Takeaways

  • Energy price volatility tied to the Middle East conflict may sustain upward inflation pressures via production, transport and services sectors, with wage‑related second‑round effects lagging. (lemonde.fr)
  • ECB March staff projections show energy inflation is expected to peak in Q2 2026 and decline afterwards—but adverse scenarios with prolonged energy shocks could push inflation and growth impact significantly higher and more persistent. (ecb.europa.eu)
  • Markets are now pricing in a “higher‑for‑longer” interest‑rate outlook, as energy price rebound reverses earlier inflation easing, complicating ECB policy path. (ecmarkets.com)

References

Frequently Asked Questions

Why is ECB's Gabriel Makhlouf concerned about energy prices?
Makhlouf is concerned that energy prices may stay elevated longer than expected due to ongoing Middle East conflict, potentially affecting inflation.
How can higher energy prices impact European inflation?
Higher energy prices can cause cost-push inflation in production, transportation, and services, and may have delayed second-round effects through wages.
What is the ECB's current stance on interest rates?
The ECB has left interest rates unchanged for now, though there was debate among members about possibly raising them.
What are second-round effects of higher energy prices?
Second-round effects refer to delayed impacts, such as wage increases, which could further fuel inflation over time.
Why must inflation expectations be closely monitored?
Monitoring inflation expectations is vital to detect any signs of de-anchoring, which could indicate loss of confidence in stable inflation targets.

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