ECB Signals Higher Alert as Inflation Risks Re-Emerge

ING’s analysis of the ECB’s March meeting highlights a clear shift in tone, even as policy rates remain unchanged. 

• The ECB’s renewed emphasis on “closely monitoring” signals heightened concern about inflation risks, particularly from rising energy prices.

• Baseline projections show moderate growth and declining inflation, but alternative scenarios point to potential stagflation if energy shocks persist.

• While rate hikes are not imminent, the central bank has opened the door to tightening if inflation pressures broaden across the economy.

If inflation proves less transitory than expected, the report considers how quickly the ECB could pivot from caution to action.