ECB's Stournaras Keeps Door Open for October Rate Hike Amid Inflation Concerns

Yannis Stournaras, a member of the European Central Bank's (ECB) Governing Council and Governor of the Bank of Greece, has indicated that the ECB may consider an interest rate hike in October if energy costs rise or if inflation data for September shows an unexpected increase. Speaking in Dublin during a meeting of European finance ministers and central bankers, Stournaras emphasized the need for caution, urging the ECB to avoid hasty decisions while remaining vigilant about inflation risks.

Currently, inflation in the euro area exceeds 3%, significantly above the ECB's target of 2%. Stournaras noted that while the absence of second-round wage effects is encouraging, ongoing supply-side shocks and fiscal expansion, coupled with a surge in artificial intelligence investments, necessitate careful monitoring. Some ECB policymakers are advocating for further tightening, while others express concerns about the potential impact on economic growth.

Financial markets are anticipating a quarter-point increase in the deposit rate to 2.75% at the next ECB meeting, scheduled for the end of October. Stournaras highlighted that the ECB's forthcoming economic projections will play a crucial role in guiding future monetary policy decisions. He pointed out that if uncertainty persists, the ECB could opt to pause and await clearer data before making any adjustments to interest rates.

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Source: KLEA News