European Central Bank Chief Economist Philip Lane said Tuesday that second-round effects from higher energy prices will take time to materialize in the eurozone economy. Speaking at the ECB forum in Sintra, Portugal, Lane emphasized that policymakers won't commit to a predetermined interest rate trajectory, leaving room for further adjustments this year.

Lane specifically highlighted indirect impacts on food prices and services costs, noting these effects are still filtering through the economy. The ECB raised rates by a quarter-point this month — the first increase since 2023 — as inflation data showed a slowdown to 3% in June, still well above the 2% target. Markets expect another rate hike by year-end despite the recent easing.

Christine Lagarde echoed concerns Monday, stating Europe has built resilience to frequent price shocks. Lane warned inflation will likely remain above target for an extended period, requiring continued monitoring of how energy cost increases percolate through the broader economy. The comments come as Middle East tensions ease, though consumer and investor confidence hasn't fully recovered to pre-war levels.

The ECB's cautious approach signals that monetary policy will remain data-dependent, with officials waiting to see if the current peace agreement translates into lasting stability before making definitive decisions on future rate moves.