ECB’s Knot Says Second-Round Effects Are Keeping Inflation High
The euro area is now observing second-round effects from higher energy costs, meaning that it will be harder to bring down consumer prices, according to European Central Bank Governing Council member Klaas Knot.
“Energy prices have found their way into other items in the consumer basket, and wages and services in particular have taken over the inflation torch,” Knot said Tuesday in a speech in Luxembourg. “It is likely that price pressures in these areas will prove more difficult to bring down.”
“Because inflation was high for a long period, underlying inflationary pressures have built up,” Knot said. “As a consequence, we now observe second-round effects.”