ECB Faces Caution Amid Ongoing Inflation Concerns

European Central Bank (ECB) officials are weighing their next steps after raising borrowing costs twice since the outbreak of the war, as inflation remains above 3%, exceeding the bank's 2% target. According to Bank of Greece Governor Yannis Stournaras, the ECB should remain alert to rising inflation risks but avoid rushing into further action. He pointed out that higher inflation has not yet triggered significant wage-related effects, but cautioned that the trend could change.

Stournaras attributed continued vigilance to repeated supply shocks, strong demand driven by fiscal expansion, and a surge in artificial intelligence investment. Another rate increase in October cannot be ruled out if inflation surges in September or energy costs rise sharply, he said. However, he emphasized that the ECB should wait for its next forecasts if the outlook remains uncertain.

Markets are pricing another increase to 2.75% next month, despite economists' reservations. Stournaras noted that it was encouraging that higher inflation had not yet triggered significant wage-related effects, but warned that this trend could change.