ECB's Rehn warns of persistent energy price pressure

Summary

The European Central Bank's Rehn has indicated that energy price pressures are likely to persist for some time, highlighting concerns as inflation in the euro area has surpassed 3% and may reach nearly 4% by the end of the year. Rehn mentioned that rising energy prices are bringing inflation closer to the ECB's more severe scenarios, with expectations that energy inflation will peak late in 2026 and headline inflation is projected to remain above target into the first half of 2027. This situation raises the risk of further tightening by the ECB, even as higher long-term borrowing costs could restrain growth and limit the impact of energy price increases on wages and other prices.

Analysis