The European Central Bank’s battle against eurozone inflation faces a fresh setback as renewed hostilities between the US and Iran drive energy prices higher, according to ECB policymaker Yannis Stournaras.
The Greek central banker stated that the escalation effectively returns the monetary authority to "square one" in its efforts to contain price pressures, signaling a significant shift in the near-term inflation outlook.
Stournaras’s comments highlight the vulnerability of the ECB’s recent policy gains to external geopolitical shocks.
The central bank had just initiated a tightening cycle, raising its key deposit facility rate by a quarter point to 2.25% earlier this week.
This move marked the first rate hike since 2023 and was intended to signal a decisive pivot toward tighter monetary conditions.
However, the resurgence of energy costs threatens to undermine the disinflationary progress that justified the initial tightening.