ECB policymaker Kazaks stresses vigilance on inflation risks despite steady April rates, warning of prolonged elevated prices.
The European Central Bank remains focused on anchoring inflation expectations as its immediate priority, despite holding interest rates steady in April. Policymakers warned that inflation will likely stay elevated for some time, even if geopolitical tensions ease quickly, increasing risks of second-round effects and unmoored expectations.
While stagflation is not the baseline scenario, the ECB acknowledged that prolonged inflation shocks could disrupt wage growth and fiscal policy. Financial markets have tightened conditions, but sustained policy reinforcement is needed to ensure transmission. Underlying inflation indicators remain stable, though weaker growth may eventually require a policy shift.
The ECB reiterated its data-dependent, meeting-by-meeting approach, moving away from its March 2026 baseline projections. Large or persistent inflation deviations would not be tolerated under its strategy, signaling continued caution.