FRANKFURT — European Central Bank Chief Economist Philip Lane said in an interview published Monday that the ECB will probably raise its quarterly inflation projection next month due to elevated energy prices from the Iran war. The interview was conducted on May 19.

"We are likely to make a further upward adjustment to the inflation forecast in June," Lane said. He also said, "It is also true that oil prices are likely to remain elevated for longer compared with our March assumptions."

Lane warned that the consequences could extend beyond energy costs. He and his colleagues "expect indirect effects beyond energy prices," he said, and warned that an energy shock shifting into a broader inflation problem would be a "major issue." He added, "We are currently assessing the magnitude of the shock."

The ECB's current baseline forecast for 2026 inflation stands at 2.6%. Markets anticipate a quarter-point increase in the ECB deposit rate to 2.25% at the June 11 policy meeting. A monthly survey of economists by Bloomberg projects consumer prices will advance by 2.9% in 2024.

He declined to signal the ECB's likely policy decision in June, saying, "In a world of uncertainty, we do not pre-commit." He referenced three potential policy scenarios previously outlined by ECB President Christine Lagarde in March. The first scenario, as he quoted it: "First, if the energy supply shock is small and temporary, we can look through it." The second: "Second, if it is persistent but medium-sized, some interest rate response may be appropriate but it would be limited and not a full tightening cycle." The third: "Third, if the shock becomes large and broadens out in a non-linear way, then a stronger monetary policy response would be needed."

"The longer the conflict continues, the less likely the most benign scenario," he said.