By Dhara Ranasinghe and Sujata Rao

LONDON (Reuters) – Soaring gas prices, staff shortages, a lack of ships — price pressures globally may be picking up faster than anticipated, challenging the view that inflation will prove transitory.

Although central bankers are insistent that inflation will end, some of them admit that it might stay high for longer. This is because a variety of issues drive up prices of goods, services, and increase inflation expectations.

These conclusions will determine the speed at which policymakers remove the billions of dollars in monetary stimulus that was unleashed to alleviate the COVID-19 crises.

Will central bankers become more concerned about growth, or will they be “bit behind” the curve? Charles Diebel is the head of fixed income for Mediolanum International Fonds.

Here are five key elements in the inflation debate:

1/ GASFLATION

European and U.S. gas prices have soared more than 350% and more than 120% respectively this year. Oil is up around 50% and Goldman Sachs (NYSE:) expects to hit $90 a barrel by end-2021 from around $80 currently.

The euro zone harmonised inflation (HICP), basket that is used by the European Central Bank comprises 4.8%. Rabobank believes that the price rise is an independent’shock” and could increase 0.15 percentage point (ppts), to its 2.2% Euro zone inflation forecast 2021, and 0.25 ppts for 2022’s 1.8% projection.

Numerous economists believe that higher gasoline prices will be around for the foreseeable future. This is due to decreased U.S. production, increasing costs of carbon emissions, permits for polluters, and restrictions on using dirtier fuels.

China’s factory inflation reached 9.5% in August. In China, power outages have resulted in a reduction of cement and aluminum production.

These outages are a risk to end-users such as those in auto supply chains, Morgan Stanley (NYSE:) said, noting “cost-push inflation and tightening upstream supply that could affect downstream production and profits.”

2/ CHIPFLATION

Semiconductors, or chips as they are known, are tiny but are having an outsized impact on global factories. General Motors’ (NYSE:), chip shortages have seen a drop in vehicle deliveries for Q3 by more than 200,000. Falling output has also led to a steep rise in used-car prices.

The chip prices are rising and Taiwanese semiconductor company TSMC plans to increase its rates by up to 20%. It will impact everything electronics, cars, phones and washing machines. Chipmakers face increased input costs due to the higher cost of power and commodities.

Jack Allen-Reynolds (senior European economist, Capital Economics) stated that it seems likely that the shortages of semiconductors will continue into next year.

Or more. According to Intel’s CEO (NASDAQ:), chips will account for a fifth of the cost of cars by 2030. That’s compared to just 4% in 2019. As electric and self-driving vehicles develop, it is predicted that chip prices could rise as high as 5%.

3/ FOODFLATION

Global food prices rose 30% year-on-year in August, an index compiled by the UN Food and Agriculture Organisation shows — a sign of broadening price pressures.

JPMorgan (NYSE) analysts attribute the increase in food prices to higher commodity prices. However, pandemic-related pressures like logistics disruptions and transportation costs are also responsible.

There is greater pressure to tighten monetary policies in emerging markets where food accounts for a significant portion of the inflation baskets. This is less problematic in developed countries but it seems inevitable that prices will rise for snacks and soft drinks.

4/GREENFLATION

Stringent rules to guide the transition to a greener future are blamed for stoking ‘greenflation’, for instance by shutting out polluting factories, vehicles, ships and mines, in turn reducing the supply of key goods and services.

European carbon emission allowances have seen their prices double to 65 Euros per tonne this year. Morgan Stanley calculated that 100 Euros would raise European retail power prices by 12 %, which would add 35 bps on top of the inflation rate in the eurozone.

You can find other examples. Shipping rates have risen 280% in this year’s first quarter, and may see a decrease in ship orders as a result of upcoming fuel rule changes.

NatWest attributes at least a portion of the rise in commodity prices to the switch to greener technologies, increasing mining and production cost.

This may have not all been fully incorporated into inflation calculations. Markets see the euro area’s inflation reaching 2% after 10 years. Danske Bank, however, sees upside risks for inflation expectations once implementation of “the green transition” gains momentum.

5/ WAGEFLATION

As prices rise, so do expectations of future inflation among consumers, who accordingly demand pay hikes.

There is mixed evidence regarding wage growth. Surveys show that the average U.S. hourly wage increased 0.6% in August, while inflation expectations for five years are around 3%.

Earnings have increased by as high as 30% in some sectors of the UK this year. While labour costs within the Euro area fell in Q2, inflation and inflation expectations are on the rise.

Jorge Garayo (Senior Rates Strategist, Societe Generale) stated that while markets might be too aggressive in pricing, it is not recommended investors stop making the same move.

That will be our big test when we enter next year.