Rising Energy Costs Push Eurozone Inflation Closer to Adverse Scenario

European Central Bank (ECB) Governing Council member Olli Rehn has expressed concern about the rising energy costs pushing inflation closer to an adverse scenario. Speaking at the 10th Annual Conference of the European Systemic Risk Board (ESRB), he highlighted the resilience shown by the eurozone economy so far. The ECB had projected growth of 0.9% for this year and 1.4% in 2027, along with moderation of inflation from 3% expected for 2026 to 2.1% in 2028.

However, Rehn pointed out that geopolitical tensions have caused a sharp increase in energy prices, while uncertainty continues to weigh on international prospects and long-term interest rates have notably risen. He warned that 'the rise in energy prices brings us closer to the ECB's adverse scenario in terms of inflation.'

Rehn also mentioned that an intense correction in valuations linked to artificial intelligence could spread to stock markets and credit markets, adding another source of risk. Furthermore, he drew attention to the high and growing public debt in advanced economies, which he considers a significant concern.