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2026-04-07 13:10:59
[ECB Governing Council Member Radev: Inflation Expectations May Rise Faster, Prepare for Rapid Interest Rate Hikes] (1) The new member of the ECB Governing Council and Governor of the Central Bank of Bulgaria, Radev, said that inflation expectations in the Eurozone may rise faster than ever before. If signs of persistent price pressures emerge, the ECB must be prepared to raise interest rates rapidly. He pointed out that the balance of risks has shifted in the unfavorable direction, with energy shocks and high uncertainty increasing the likelihood of more adverse scenarios. (2) The surge in energy costs triggered by the Iran war has pushed inflation well above the 2% target level. A key risk is that consumers and businesses may quickly adjust their expectations, demanding higher prices and wages, thus triggering an uncontrollable inflationary spiral. Radev said that the recent inflation situation has increased the sensitivity of market expectations, and the transmission of new shocks to prices may be faster than normal. (3) Inflation expectations are currently still at the target level, and no obvious second-round effect has been observed. However, Radev stressed that we cannot be complacent. If the shock continues and begins to affect wages, profits, and inflation expectations, the cost of inaction will rise, and timely action is the wiser course of action. He stated that it was uncertain whether there would be enough data to make decisions before the April 30 meeting, but there would be sufficient information at that time to conduct more specific policy discussions.
