Energy shocks reignite inflation risks; ECB says policy should remain moderate.

European Central Bank Chief Economist Lane said that in assessing the impact of the second-round energy shock on the economy, a moderate policy response by the ECB is the appropriate choice to control inflation. She said that after the first surge in oil and gas prices following the outbreak of the Iran war, the euro area economy showed greater resilience than expected. But a new round of energy price pressures brings both upside risks to inflation and may also drag on economic growth, so it needs close monitoring. In addition to continuously assessing the transmission process of the first-round shock, it is also necessary to judge whether the second-round shock will affect economic activity and inflation dynamics more strongly than the first round. Our monetary policy remains on a 'middle path,' and a moderate policy response will help keep inflation at a reasonable level. The ECB has raised interest rates twice to ensure that medium-term inflation falls back to its 2% target. Although policymakers, including Lane, have said that the current rise in energy costs has not yet affected inflation expectations, they remain vigilant, and economists and financial markets expect the ECB to tighten policy further.