According to Dutch ECB policymaker Klaas Knot, investors must be aware of the risk of rising inflation to prevent shock adjustments, even as price increases still appear to be temporary.

"Only low inflation and low interest rates can sustain the current risk appetite in the markets," said Knot.

"I still expect the rise in inflation to be largely temporary, but we must consider other scenarios with structurally higher inflation and higher interest rates. If we don't, it could lead to shock price falls in the future."

In September, a spike in energy prices pushed euro area inflation to 3.4%, its highest level since 2008. However, inflation is still expected to slow next year as the impact of higher energy prices fades.

"The influence of energy prices on inflation is temporary by nature, as they must continue to rise in order to push up inflation," said Knot.

"However, global supply constraints also push inflation higher, which may be less temporary. They could be caused by international trade readjustment, as supply chains are spread less around the world."