ECB’s Stournaras: Central Bank Cannot Look Through Persistent Supply Shocks

Stournaras is drawing a line the ECB has avoided for most of this cycle: supply-driven inflation, if it persists, cannot simply be waited out. The nod to fiscal policy and the AI boom as inflation drivers matters because neither is responsive to rate hikes, which complicates the standard reaction function. His preference for December over October, absent second-round effects, signals the debate inside the Governing Council is about timing rather than direction. Whether wage and services data start showing those second-round effects is the open question.