By Bart H. Meijer

AMSTERDAM (Reuters – Investors should be mindful of the possibility of inflation rising to avoid unexpected adjustments. However, price rises appear to have been temporary. Klaas Knot (Dutch European Central Bank) said Monday.

According to the Dutch central bank governor, “The market’s current risk appetite cannot be sustained by high inflation and low interest rates,” he told reporters.

While I still believe that inflation will rise only temporarily, it is important to consider the possibility of higher inflation or higher interest rates. We must do so, or we could see shock price drops in the future.

The euro zone’s inflation reached 3.4% last September thanks to an energy price spike, the highest rate since 2008. As the impact of rising energy prices diminishes, however, inflation should slow in 2019.

Knot explained that “the effect of energy prices upon inflation is temporary in nature” and said that they must continue rising to maintain inflation.

But global supply constraints, although less temporary, are also pushing inflation up. Because supply chains spread more widely around the globe, they could also be due to a global trade adjustment.