Inflation, Supply Shocks and the Case for a Cautious and Differentiated Monetary Policy Response
| Authors |
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| Publication date | 2026 |
| Series | Monetary Dialogue Papers |
| Number of pages | 26 |
| Publisher | Brussels: European Union |
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| Abstract | The Hormuz shock of February 2026 confronts the European Central Bank (ECB) with a familiar dilemma: inaction can risk entrenching inflation, while tightening risks deepening the slowdown and penalising renewable energy and cleantech investment. We argue that the ECB should be cautious and, if tightening proves necessary, ensure its operations shield renewable energy and cleantech sectors. Our analysis also reveals a growing gap between the ECB's communication on fossil fuel risks and its policy framework. |
| Document type | Report |
| Note | This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 22 June 2026. |
| Language | English |
| Published at |
https://doi.org/10.2861/9518642
(Final published version)
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| Downloads |
Inflation, Supply Shocks and the Case for a Cautious and Differentiated Monetary Policy Response
(Final published version)
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