Euro Zone Economy May Already Be on ECB's 'Adverse' Path, Policymaker Warns

Key Points

• Inflation jumped above ECB's 2% target due to energy costs from Iran war
• ECB may need to act as early as this month if inflation expectations rise
• Memory effect from 2022 inflation could accelerate current price pressures
• Bank must preserve credibility by acting decisively if needed

Full Details

European Central Bank policymaker Primož Dolenc warned on April 1, 2026, that the eurozone economy may already be on the 'adverse' path outlined by the ECB, with inflation potentially becoming entrenched faster than in 2022 due to consumer behavior shaped by memories of rapid price increases. Inflation jumped above the ECB's 2% target last month as energy costs rose because of the war in Iran. Dolenc stated that if higher energy prices seep into other parts of the economy quickly and inflation expectations rise due to the 'memory effect,' the bank would need to consider acting sooner to preserve credibility. He noted that if the war drags on, high energy prices may spread through the economy, potentially forcing the ECB to act as early as this month. The warning comes amid broader concerns about the economic impact of the Iran conflict on European markets.