MNI BRIEF: Diverging Inflation Makes ECB Job Harder-Stournaras

Diverging inflation and growth prospects across major economies in the wake of the U.S. tariff shock makes the conduct of monetary policy more complex in the euro area, Bank of Greece Governor Yannis Stournaras said on Tuesday in a speech.

Trade tensions could trigger a resurgence in inflation or inflation expectations that could halt monetary policy normalisation, exerting pressure on vulnerable sectors of the economy, he said.

“A potential further decoupling of monetary policies among major economies could cause turbulence in exchange rates and international capital flows,” he said, adding that central banks are expected to be less synchronised, as they need to balance the impact of energy prices and import prices. Stournaras said that monetary policy should be flexible in this uncertain landscape. (See MNI INTERVIEW: Tariff Shock A Challenge To ECB's QT - Reichlin)