How long a price shock takes to spread: the RBI hikes, Lane waits, the New York Fed counts a year

Victoria Shinder07 October 2026, 07:332 min read

A supply shock, whether from energy or tariffs, raises some prices directly. The question for central banks is whether it then spreads: into other prices, wages and expectations. Three texts published on 6 and 7 October answer that question differently, and the difference is partly about timing.

The Reserve Bank of India raised rates. On 7 October the RBI's MPC lifted the repo rate by 25 basis points to 5.50% and moved to a "calibrated tightening" stance. Its own assessment of second-round effects is cautious: "some evidence of elevated inflation expectations and generalisation of inflation", but "only limited signs of supply side pressures getting embedded in pricing behaviour". It also notes that second-round effects "take time to manifest and are difficult to extract from available data". It acted anyway, with headline inflation projected to average almost 5.8% over the next three quarters.

The ECB's chief economist is watching. In an interview published on 6 October, Philip Lane said the ECB has "not seen, so far, very strong second round effects" of the energy shock, while energy prices are above its baseline. He added a factor that works the other way: rising long-term yields, especially when driven from outside Europe, slow the economy and on their own reduce inflation.

The New York Fed measured the lag. Research summarised on Liberty Street Economics the same day finds that tariffs reach import prices almost immediately, but their effect on US-made goods, through input costs and markups, builds over six to twelve months, and the full effect on consumer goods prices takes about a year.

What connects them. The New York Fed result gives a reason why "not seen so far" and "acting now" can both be reasonable: the indirect part of a price shock arrives late. The RBI, with inflation projected to peak at 6.0% in the coming quarter, chose not to wait for it to show; Lane described the ECB as still assessing it.