ECB Executive Board member Frank Elderson said in a speech that there are two channels through which Russia invasion of Ukraine weighs Eurozone outlook. They are “negative confidence effects, which have an impact on both international trade and on financial markets, and high energy prices.”
But he noted that outlook prevailing the invasion was “quite favorable”. And, “this implies that in our updated baseline outlook, and also in more adverse and severe scenarios for the impact of the war, stagnation is not foreseen.”
“It is a well-established practice in monetary policy that in times of uncertainty prudent policy calls for gradualism,” Elderson said. “This holds particularly true when we approach potential turning points in the monetary policy cycle.”
“If the evolution of the inflation outlook supported by incoming data allows a further normalisation of monetary policy, we stand ready to adjust our instruments accordingly.”
