Keeping inflation in check will become harder as trade tensions and other “structural shifts” make the world more volatile, the European Central Bank has warned, as it vowed it would fight high price growth with “forceful or persistent” actions.
European rate-setters have tweaked their strategy to emphasise the risk of sudden but persistent increases in inflation, after they were caught out by a jump in price rises in 2021-22 partly due to the war in Ukraine. The previous strategy focused on the then-relevant risk of deflation.
“Structural shifts such as geopolitical and economic fragmentation and increasing use of artificial intelligence make the inflation environment more uncertain,” the ECB warned in a monetary policy strategy statement on Monday.