Sam Fleming

To an extent, the price rises are inevitable because the increase in energy price is immediately going to start getting reflected

in fuel prices and potentially prices of food and other commodities.

So we would expect a movement in headline inflation in any case.

What the central bankers are more looking for is whether there are so-called second round effects.

So does this start to affect wage setting?

Does it start to affect the wages that workers demand?

Does it compel companies to start raising the prices of other products in the economy?

And does that create a kind of self-fulfilling momentum in inflation?

Now, I don't think we see any of that yet.

It's way too soon.

But they are worried because clearly there's a risk of that happening.

And let's face it, a lot of the central banks around the world went into this energy crisis with inflation, which was well above a target.

So they're not coming into this in a great position.

Initially, the tools they're using are communication, setting out scenarios for how the energy crisis might unfold, and expressing a willingness and a readiness to raise interest rates if necessary to quell increases in inflation expectations.

and that they will not let inflation get out of hand.

But in the end, they will have to follow this stuff up.

I think the signal that we got from Christine Lagarde, the president of the ECB yesterday, is that the ECB is seriously considering the need potentially to increase interest rates.

I think it's possible that we could see a rise as soon as this summer.

The messaging from the Bank of England, policymakers went into the meeting far more cautious about sending strong signals that rates could

might have to rise but still the message coming out of that meeting is that if this carries on for long enough this energy crunch then they will have to raise interest rates