ECB’s Escrivá: Hard to Determine Which Risks Prevail with Regards to Inflation

24 March 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member José Luis Escrivá said on Monday that it was difficult to determine whether downside or upside risks prevailed with regards to inflation.

In a speech at a conference hosted by Caixaforum in Madrid, Escrivá said that ‘risks to economic growth are tilted to the downside more than the upside … With inflation it is hard, there is uncertainty coming from both directions’.

Uncertainty was now extreme, he said.

‘We have never seen such low credibility around the baseline scenario as we are seeing now’, he said. ‘It is very hard to define alternative scenarios, in fact risks are two-sided over the baseline scenario.’

US trade policies are one of the sources of uncertainty, according to Escrivá.

‘Some people thought these [Trump’s campaign promises] would not materialise and now are seeing that there is in fact a very elaborated agenda about it’, he said.

The way the market has priced in expectations of higher defence spending with a 40bp surge on European bonds on average is ‘reasonable’, he said.

‘We should be prudent’, he said concerning looser fiscal rules in Europe. ‘Debt levels are high and some countries do not have any fiscal space’.

Higher defence spending and loser rules were ‘good news’, but debt levels should remain at prudent levels and should not generate spillover effects in the euro area, he said.