FRANKFURT, Reuters – Rising energy prices could force the European Central Bank (ECB) to cease “looking through high inflation” and to act to temper growth of price, Isabel Schnabel, an ECB member, said Saturday.

The inflation rate soared to a new record high of 5% in the last month, exceeding twice the ECB target of 2%. However, the bank is not tightening policy yet, arguing that prices will continue rising as temporary factors such as high unemployment are responsible.

Schnabel spoke out saying that the green transition could pose upside risks for medium-term inflation. Rising energy prices could require an end to a “looking through” policy.

Schnabel indicated that the ECB could change its policies in two different scenarios.

One is when high energy prices affect price settings in other areas of the economy.

Schnabel said that there were no indications of second-round effects. “Wage Growth and Union Demands are still comparatively Moderate.”

A second scenario is if energy prices are threatening to rise above target, which would be heavily impacted carbon taxes and green transition.

Schnabel stated that while the transition may continue to be protracted, supply and demand imbalances might persist. Furthermore, carbon prices are likely rising further. As a result, the contribution of electricity and energy prices to inflation in consumer prices could rise to levels higher than the historical norm.

Schnabel stated that the carbon tax would not have any negative impact on economic growth, and that studies show that they could actually be beneficial.