ECB Economists Warn Energy Costs Pose Risks to Inflation and Growth

Eurozone inflation is 3.8%, nearly double the ECB's 2% target. On Oct. 5, 2026 in Sorrento, Bundesbank President Joachim Nagel said expensive energy has not yet fed into wages and other prices. "There are so far no clear signs that inflation has fed through to price and wage setting," he said, with longer-term expectations still aligned with the 2% target. He warned low gas storage, lost refining capacity, drought, wildfires and fertiliser shortages keep price risks high. ECB Chief Economist Philip Lane framed the latest surge as a second wave of the energy supply shock after the initial Middle East jump and a summer pullback, posing upside risks to inflation and downside risks to growth. He said rates will be set meeting-by-meeting and data-dependent. The record shows clear spillover into wage and price setting is not yet visible. Markets, per LSEG, price 20% odds of an October hike and 80% in December and expect two to three more hikes over the year. Nagel did not endorse those bets. EUR/USD was near 1.1215, down 0.3%, after his remarks.