ECB’s Patsalides Echoes Warnings of Possible End of Disinflation, Stagflation

7 April 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Christodoulos Patsalides on Monday echoed warnings that global developments could threaten the disinflation process and potentially produce stagflation.

In remarks published on the website of the Central Bank of Cyprus, which he heads, Patsalides said, ‘Unfortunately, the uncertainty surrounding the course of the global economy not only persists, but is also intensifying, with the emergence of new, complex risks. Under these circumstances, the possibility of a deviation from the baseline scenario becomes more likely.’

The imposition of tariffs threatened ‘negative consequences for economic activity internationally’, he said, pointing to the subsequent decline of stock markets.

Patsalides also warned of the potential for ‘increased pressures on national budgets’ as a consequence of higher government spending on defence and noted the danger to financial stability of digital payment systems and to global growth due to climate change.

‘The consequences of the new risk matrix are difficult to predict, as uncertainty and insecurity are at particularly high levels’, he said. ‘In this light, the possibility of deviation from the basic macroeconomic scenarios increases.’

‘As a result, reports and analyses are increasing that warn of negative impacts on growth and a possible halt to the disinflationary process or even the emergence of stagflation’, he continued. ‘At the same time, risks to financial stability are increasing as the chances of an extreme scenario occurring increase.’