Central banks warn of persistent inflation from energy and geopolitical shocks

Central banks in Europe, Australia, and New Zealand are warning of persistent inflation risks driven by geopolitical tensions and soaring energy costs.

In the Eurozone, the European Central Bank (ECB) anticipates that a second wave of energy price increases could keep inflation elevated, with a return to the 2% target not expected until mid-2027. ECB Chief Economist Philip Lane noted that while electricity prices have been somewhat buffered by renewables, rising gas and oil prices are likely to exert upward pressure on food and general goods. Wholesale gas prices are also passing through to consumers more rapidly than in previous cycles.

In Australia, Reserve Bank of Australia (RBA) Governor Michele Bullock highlighted that supply shocks are difficult for monetary policy to manage and warned of potential second-round effects on wages and prices. Economic director David Koch has criticized the RBA, arguing that households should not bear the burden of inflation driven by government spending and global oil prices.

Similarly, Reserve Bank of New Zealand (RBNZ) Governor Anna Breman warned that if high global oil prices persist, near-term inflation could exceed previous forecasts. While New Zealand's economy shows signs of uneven growth, the central bank remains focused on the risks posed by global headwinds and energy volatility.