ECB Has Space to Act Prudently, Despite Surging Eurozone Inflation

Dow Jones
2 hours ago

1225 GMT - Despite rising supplies from the Middle East, crude-oil prices are still pushing inflation higher, KfW Research economist Stephanie Schoenwald says. Eurozone inflation rose to 3.8% from 3.2% in August, driven by the protracted energy-price shock. Reduced processing capacities due to the war have exacerbated shortages of refined products, particularly diesel, she says. Alongside households' medium-term inflation expectations picking up again, this strengthens the case for a further European Central Bank interest-rate hike, Schoenwald notes. But the situation is less serious than the inflation spike of 2022, with core inflation remarkably stable. "This gives the ECB the leeway to act prudently. A moderately restrictive key interest rate is likely to remain the appropriate response for the time being," she says.

 

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