ECB warns of inflationary pressures due to conflict.

VTV.vn - Concerns about a potential recession in the eurozone are real and well-founded, amid new negative supply-side shocks caused by the Middle East conflict.

ECB warns of inflationary pressures due to conflict.

The Governor of the Central Bank of Greece, Yannis Stournaras, stated that the risk of the Eurozone falling into recession if the conflict in the Middle East continues is "real and well-founded," and emphasized that the negotiation process to end hostilities with Iran will play a crucial role in the monetary policy of the European Central Bank (ECB).

In an interview published in the Cypriot newspaper Phileleftheros on May 3rd, Mr. Stournaras – who is also a member of the ECB Governing Council – stated that the eurozone economy still shows resilience, but growth momentum has weakened.

Mr. Stournaras said: “Concerns about a potential recession in the Eurozone are real and well-founded, given the new negative supply-side shocks caused by the Middle East conflict.”

According to Mr. Stournaras, rising energy prices and increasing uncertainty are directly impacting growth and inflation, given the region's heavy reliance on imported energy.

He also noted that, unlike in 2022, current inflationary pressures are emerging against a backdrop of weaker growth, tighter financial conditions, and more limited fiscal space. This narrows policy-making room and makes economies more vulnerable to shocks.

To date, rising energy prices have not had a significant ripple effect on inflation in Europe. However, if energy infrastructure is damaged, inflationary pressures could increase in the medium term, while prolonged uncertainty risks undermining investment and growth.

Regarding policy direction, Mr. Stournaras said the ECB's response would depend on the magnitude, duration, and transmission channel of the shock.

If the impact is only temporary and does not create a significant ripple effect, the central bank may not need to adjust its monetary policy.

However, in the event of large but temporary inflation exceeding the target, the ECB may need to implement “moderate adjustments” to limit the spillover effects.

If inflation deviates significantly and persistently from the target, a stronger policy response will be needed.

Source: https://vtv.vn/ecb-canh-bao-ap-luc-lam-phat-do-xung-dot-100260505105658301.htm