In addition, higher energy costs may have indirect effects on the inflation rate - if, for example, firms pass on their increased costs of production in the form of higher consumer prices for non-energy goods or services or if workers respond to the increase in the cost of living by demanding higher nominal wages.
A jump in energy costs could also increase the public's longer-term inflation expectations, a factor that would put additional upward pressure on inflation. These indirect effects of higher energy prices on the overall rate of inflation are called second-round effects. The overall inflation rate reflects both first-round and second-round effects.