ECB Rates Can Prevent Price Shock From Spreading, Dolenc Says

The European Central Bank can stop the energy-price spikes from affecting the broader economy, according to Governing Council member Primoz Dolenc.

“Monetary policy cannot directly influence the evolution of energy shocks, geopolitical tensions, or structural competitiveness issues,” he said in Portoroz, Slovenia on Thursday. “What we can do is prevent initial price shocks from spilling over into broader and more persistent inflationary dynamics.”

The ECB has hiked interest rates twice and is expected to do so again, most probably at its December meeting. Inflation hit 3.8% in September, almost twice the central bank’s price goal.

“We expect elevated inflation of around 3% to persist through the end of this year,” Dolenc said. “Over the next two years, barring new shocks, we anticipate a gradual return of inflation toward the 2% target, while economic growth is expected to accelerate during the same period.”