ECB Chief Economist Lien: The second wave of the energy supply shock poses a direct upward risk to inflation and a downside risk to economic growth. Demand disruptions due to high energy costs may limit the need to raise interest rates. We are still maintaining the “middle path” in monetary policy; a moderate response is appropriate. Underlying inflation indicators show that an upward trend in medium-term inflation has yet to be formed. A rise in long-term interest rates will slow growth and make the transmission effect less than expected.

ECB Chief Economist Lien: The second wave of the energy supply shock poses a direct upward risk to inflation and a downside risk to economic growth. Demand disruptions due to high energy costs may limit the need to raise interest rates. We are still maintaining the “middle path” in monetary policy; a moderate response is appropriate. Underlying inflation indicators show that an upward trend in medium-term inflation has yet to be formed. A rise in long-term interest rates will slow growth and make the transmission effect less than expected.