- ECB’s Vujcic: Power costs nonetheless very near baseline situation
The ECB baseline situation assumed that whereas power costs would spike within the quick time period, they’d finally stabilize. The ECB anticipated oil costs to peak round $90 per barrel in Q2 of 2026 earlier than progressively declining. The hostile situation noticed costs reaching $119 per barrel, whereas the worst-case situation projected oil to spike to $145 per barrel and stay persistently excessive.
Regardless of the upward revision in inflation, the ECB has maintained a affected person method to keep away from overreacting to the supply-side shock that can be anticipated to dampen financial development.
The ECB has explicitly acknowledged it’s not pre-committing to a selected price path. Their response to the present baseline is characterised by neutrality and data-dependency. The central financial institution is prepared to look by short-term power spikes except they start to drive up wages and inflation expectations.
If the baseline holds, the ECB will simply hold charges on maintain for the foreseeable future. If the hostile or extreme situations materialize and core inflation begins to extend together with different knowledge like wages and inflation expectations, the ECB has signalled it’s well-positioned to behave and improve rates of interest to maintain inflation round their 2% goal.
