world-economy

ECB Must Balance Rate Hikes Against Economic Risks, Officials Signal

European Central Bank policymakers are weighing competing pressures as they prepare for next month's interest-rate decision, with Governing Council members expressing caution about overly aggressive policy tightening.

Yannis Stournaras warned that excessively restrictive measures could damage economic activity and investment across the eurozone. A modest rate increase could help control inflation without inflicting significant economic pain, he suggested.

Oil prices pose an additional complication. Stournaras cautioned that sustained elevated energy costs may force the ECB's hand, potentially necessitating rate action regardless of broader economic concerns.

Maintaining central bank credibility also favors a measured increase, policymakers indicated. Joachim Nagel added that geopolitical risks to price stability—including regional conflicts—will shape the upcoming decision.