A senior European Central Bank official stated that the ongoing energy shock will necessitate a tighter policy stance.
2026-04-07 11:31:00
On Monday (April 6), Yannis Stournaras, a member of the European Central Bank's Governing Council and Governor of the Bank of Greece, delivered an important speech, clearly stating that if the energy shock related to the Middle East lasts long enough and further transmits to medium-term inflation expectations and wage levels, the European Central Bank will have to consider adopting a tighter monetary policy stance.
This statement highlights the potentially serious impact of the Middle East conflict on the Eurozone economy and adds further uncertainty to the direction of the European Central Bank's monetary policy in 2026.
At the Bank of Greece's annual shareholders' meeting, Giannis Stournaras pointed out that the European Central Bank's monetary policy will face greater uncertainty in 2026, thus requiring a high degree of flexibility.
He stated, "In this environment, the ECB Governing Council will assess whether rising energy prices could be transmitted as a broad and persistent risk of inflation through expectations, wage changes and price setting mechanisms."
He further explained, "If energy cost pressures prove to be temporary, the impact of this shock can be ignored. But if the energy shock is more robust and persistent, and affects medium-term inflation expectations and wage changes, then a tighter monetary policy stance is expected to be needed."
He added that the ECB is expected to continue its data-driven, meeting-by-meeting decision-making approach, while remaining prepared to adjust its policy stance as appropriate.
Yannis Stournaras emphasized that the recent military escalation in the Middle East is severely disrupting energy markets and global supply chains, and adversely affecting economic growth and inflation. He noted, "These effects could worsen further if the crisis continues or spreads throughout the region, and against this backdrop, the balance of risks facing the global and Eurozone economies has deteriorated significantly."
Regarding the overall economic outlook for the Eurozone, he stated that, affected by the Middle East conflict, increased uncertainty, and disruptions in the energy market, Eurozone economic growth is projected to slow to 0.9% in 2026 from 1.4% in 2025. These factors are significantly increasing the risk of stagflation, a complex situation of slowing economic growth coupled with inflationary pressures.
At the domestic level in Greece, Yannis Stournaras stated that the process of declining inflation in Greece is expected to be hampered in 2026 by new external cost pressures from the international energy market. Even if core inflation slows to 3.0%, overall inflation is still projected to rise to 3.1%.
However, he remains relatively optimistic about the Greek economy's growth. He pointed out that despite the weak external environment, the Greek economy has shown greater resilience, and is expected to grow by 1.9% in 2026, exceeding the overall growth rate of the Eurozone.
Yannis Stournaras also specifically mentioned the impact of fiscal policy on the ECB's response. He stated that targeted, temporary measures can effectively buffer the effects of energy shocks, but broad and permanent fiscal measures could increase aggregate demand and complicate monetary policy adjustments.
In reviewing monetary policy for 2025, Yannis Stournaras stated that the Eurozone inflation rate has fallen to a level consistent with the European Central Bank's medium-term target. Against this backdrop, the Eurosystem's monetary policy will become less restrictive in 2025. He pointed out that the interest rate cuts that began in June 2024 will continue into the first half of 2025, reaching a cumulative reduction of 200 basis points by June 2025, while the ECB Governing Council has kept the key policy rate unchanged at 2% since July 2025.
Overall , Yannis Stournaras's speech sent a clear signal: against the backdrop of the ongoing Middle East wars pushing up energy prices, the European Central Bank is closely monitoring the secondary transmission of inflation risks. If the energy shock evolves from a short-term disturbance into long-term pressure, Eurozone monetary policy may shift from its current moderately accommodative stance to a more restrictive one. This statement not only reflects the ECB's vigilance regarding the risk of stagflation but also serves as a warning to global market investors.
The dual challenges of slowing economic growth and potential inflationary pressures in the Eurozone will test the European Central Bank's policy flexibility and decision-making wisdom. The international community needs to continue to monitor the evolving situation in the Middle East and its profound impact on global economic and financial stability.
This statement highlights the potentially serious impact of the Middle East conflict on the Eurozone economy and adds further uncertainty to the direction of the European Central Bank's monetary policy in 2026.
The ongoing energy shock may trigger a shift in monetary policy.
At the Bank of Greece's annual shareholders' meeting, Giannis Stournaras pointed out that the European Central Bank's monetary policy will face greater uncertainty in 2026, thus requiring a high degree of flexibility.
He stated, "In this environment, the ECB Governing Council will assess whether rising energy prices could be transmitted as a broad and persistent risk of inflation through expectations, wage changes and price setting mechanisms."
He further explained, "If energy cost pressures prove to be temporary, the impact of this shock can be ignored. But if the energy shock is more robust and persistent, and affects medium-term inflation expectations and wage changes, then a tighter monetary policy stance is expected to be needed."
He added that the ECB is expected to continue its data-driven, meeting-by-meeting decision-making approach, while remaining prepared to adjust its policy stance as appropriate.
The Middle East conflict has dealt a double blow to economic growth and inflation.
Yannis Stournaras emphasized that the recent military escalation in the Middle East is severely disrupting energy markets and global supply chains, and adversely affecting economic growth and inflation. He noted, "These effects could worsen further if the crisis continues or spreads throughout the region, and against this backdrop, the balance of risks facing the global and Eurozone economies has deteriorated significantly."
Regarding the overall economic outlook for the Eurozone, he stated that, affected by the Middle East conflict, increased uncertainty, and disruptions in the energy market, Eurozone economic growth is projected to slow to 0.9% in 2026 from 1.4% in 2025. These factors are significantly increasing the risk of stagflation, a complex situation of slowing economic growth coupled with inflationary pressures.
The Greek economy faces external pressures but remains resilient.
At the domestic level in Greece, Yannis Stournaras stated that the process of declining inflation in Greece is expected to be hampered in 2026 by new external cost pressures from the international energy market. Even if core inflation slows to 3.0%, overall inflation is still projected to rise to 3.1%.
However, he remains relatively optimistic about the Greek economy's growth. He pointed out that despite the weak external environment, the Greek economy has shown greater resilience, and is expected to grow by 1.9% in 2026, exceeding the overall growth rate of the Eurozone.
Fiscal policy needs to be carefully coordinated with monetary policy.
Yannis Stournaras also specifically mentioned the impact of fiscal policy on the ECB's response. He stated that targeted, temporary measures can effectively buffer the effects of energy shocks, but broad and permanent fiscal measures could increase aggregate demand and complicate monetary policy adjustments.
2025 Monetary Policy Review and Future Outlook
In reviewing monetary policy for 2025, Yannis Stournaras stated that the Eurozone inflation rate has fallen to a level consistent with the European Central Bank's medium-term target. Against this backdrop, the Eurosystem's monetary policy will become less restrictive in 2025. He pointed out that the interest rate cuts that began in June 2024 will continue into the first half of 2025, reaching a cumulative reduction of 200 basis points by June 2025, while the ECB Governing Council has kept the key policy rate unchanged at 2% since July 2025.
Overall , Yannis Stournaras's speech sent a clear signal: against the backdrop of the ongoing Middle East wars pushing up energy prices, the European Central Bank is closely monitoring the secondary transmission of inflation risks. If the energy shock evolves from a short-term disturbance into long-term pressure, Eurozone monetary policy may shift from its current moderately accommodative stance to a more restrictive one. This statement not only reflects the ECB's vigilance regarding the risk of stagflation but also serves as a warning to global market investors.
The dual challenges of slowing economic growth and potential inflationary pressures in the Eurozone will test the European Central Bank's policy flexibility and decision-making wisdom. The international community needs to continue to monitor the evolving situation in the Middle East and its profound impact on global economic and financial stability.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
