ECB Rate Hike Still on Table as Stournaras Warns of Persistent Inflation Risks

Yannis Stournaras, a European Central Bank (ECB) Governing Council member and Bank of Greece Governor, has cast doubt on whether the ECB's rate hiking cycle is over. In an interview, he warned that inflation risks are not yet under control and hinted at the possibility of another rate increase in October.

The ECB has already raised interest rates twice this year, but Stournaras emphasized that policymakers should remain vigilant about inflation trends. He noted that there are currently no signs of second-round effects, meaning the initial rise in energy costs has not yet translated into a broader wage and price spiral.

However, Stournaras warned that the ECB cannot ignore supply shocks affecting the economy. Energy prices have become a significant challenge for the ECB, with prolonged high gas prices potentially feeding into other prices and wages. The central bank has identified the risk of indirect and second-round effects if elevated energy costs persist.

The possibility of another rate increase in October is still uncertain, but Stournaras' comments suggest that policymakers will closely monitor inflation data before making a decision. The ECB's next meeting is scheduled for October 29, and markets will be watching closely to see whether supply shocks remain temporary or begin spreading into wages and consumer prices.