European Central Bank official Sleijpen said today that uncertainty in the economic outlook remains elevated and that close attention should be paid to inflation expectations.
Sleijpen remarked that although a recurrence of the conditions seen in 2022 is regarded as less likely, it cannot be completely excluded. The official pointed out that oil prices have to date not escalated to the levels that were earlier feared, an observation he raised while framing broader risks to inflation dynamics.
A central concern for policy, Sleijpen said, is the potential for second-round effects. He identified these secondary channels as a key issue for monetary policymakers to weigh when setting policy. In particular, household price expectations appear to be less firmly anchored than in the past, a development the official highlighted as something that warrants monitoring.
Emphasizing the need for a forward-looking approach, Sleijpen said the ECB must look beyond the immediate fallout from economic shocks when making decisions. He stressed that while expectations remain broadly anchored for now, maintaining vigilance is essential.
Taken together, the comments underline a monetary policy stance attentive to evolving inflation psychology and to the persistence of uncertainty. Sleijpen's remarks singled out both the role of energy price trajectories - noting oil has not yet reached feared heights - and the importance of expectations management in assessing medium-term inflation risks.
Policy officials, he indicated, should therefore keep a wide lens on developments rather than focus only on short-term movements. That approach, he suggested, is necessary because of the potential for secondary effects and the observed softening in household anchoring of prices.
In sum, Sleijpen called for continued monitoring of inflation expectations, vigilance in the face of elevated uncertainty, and a policy orientation that accounts for second-round risks and the durability of price expectations.
Clear summary
Sleijpen said uncertainty is elevated and inflation expectations need close monitoring. A repeat of 2022 is considered less likely but not impossible. Oil prices have not reached earlier feared levels. Second-round effects and less firmly anchored household price expectations are central concerns, and the ECB must look beyond immediate shock effects when framing policy. While expectations are broadly anchored, vigilance remains important.