Sleijpen highlights short-term relief from lower energy costs but warns AI investment and weak growth may sustain inflationary risks.
A European Central Bank policymaker said falling energy prices should ease Eurozone inflation in coming months, reducing immediate pressure for aggressive rate hikes. Lower oil and gas costs are expected to feed into consumer prices, offering temporary relief to policymakers.
The ECB remains cautious about structural economic weakness and the inflationary impact of artificial intelligence. Short-term AI spending on infrastructure and labor could drive prices higher, though long-term productivity gains may offset this. Europe lags the US and China in AI investment, requiring significant capital expenditure that could fuel supply chain inflation.
Markets are pricing a 32% chance of a July rate hike, rising to 64% for September. Unless German CPI data surprises upward, the ECB is likely to hold rates steady in July and await further data.