ECB’s Stournaras: Avoiding inflation undershoot becoming policy priority

Greek ECB Governing Council member Yannis Stournaras emphasized at an event overnight that inflation in Eurozone is now projected to reach the 2% target “sooner than earlier expectations,” likely by early 2025 rather than the fourth quarter as previously anticipated. This shift suggests the ECB’s policy focus may increasingly pivot to ensuring “we don’t undershoot our inflation objective”.

Stournaras highlighted markets are “extremely sensitive” to disappointing growth readings. He warned, “If negative surprises for growth come in and we fail to unwind our restrictive monetary-policy stance at the appropriate pace, unnecessary market turbulence could be induced.”

While he acknowledged that the September inflation reading of 1.7% marked a success in controlling price pressures, he cautioned it should also serve as a “wake-up call.” Prolonged monetary restrictions, he warned, could risk “undershooting of our inflation target over the medium term and impede growth”.