Bank of Finland's Välimäki: energy shock makes the ECB's path back to 2% less comfortable
Serguey Asael Shinder1 min readTuomas Välimäki, a Board member of the Bank of Finland, said on 2 November in Helsinki that the renewed energy shock "has made the outlook more uncomfortable, but it has not – at least so far – fundamentally changed the underlying inflation picture". He was summing up the ECB Governing Council meeting of the previous week, at which the key interest rates were kept unchanged.
Euro area inflation rose to 3.8% in September, largely because of higher energy prices, Välimäki said, with oil up and European gas prices markedly higher. For policy, the question is whether the shock spreads to a wider range of prices and wages and to expectations. So far, he said, the evidence is limited: underlying inflation is broadly stable, wages show no material response yet, medium- and longer-term expectations are anchored, and labour-market tightness has eased. He added that the shock's size and duration have grown, which raises the upside risks.
On growth he described "almost the mirror image": activity has kept expanding, supported by AI-related investment, digitalisation and public spending on infrastructure and defence, while higher energy costs, higher long-term rates, tighter financing and weaker consumer confidence weigh on it.
Välimäki defended deciding meeting by meeting. When shocks pull inflation and growth in different directions, he said, pre-committing to a rate path "would create a false sense of precision". By December the Council will have new projections and more data on the energy shock.
What it means
The message is that the ECB is not treating 3.8% headline inflation as a reason to move on its own. What would change that is evidence in wages and underlying prices, and the December projections are the next point at which the Council will have it.