By Marta Vilar – MADRID (Econostream) - European Central Bank Governing Council member José Luis Escrivá said on Thursday that the key challenge for policymakers was determining whether the inflationary effects of the Middle East war would prove temporary or become persistent enough to threaten the ECB's price stability objective.
Speaking during a panel discussion at the 5th Conference on the Spanish Economy, organized by the Banco de España, CEMFI and UIMP in Santander, Spain, Escrivá, who heads the national central bank, said the current environment was defined above all by uncertainty, arguing that policymakers could no longer rely on central scenarios as they had in the past.
The persistence and magnitude of the shock following the outbreak of the war had created inflation dynamics that central banks were still trying to understand, he added.
"We have to determine—and this is not easy—the extent to which these effects will prove to be temporary or whether they could generate dynamics that compromise our medium-term objective of maintaining price stability," he said.
Escrivá also pointed to the surprising resilience of economies despite repeated adverse shocks.
The US and Spanish economies had shown a greater capacity to withstand negative developments than initially expected, with economic activity and employment proving more resilient than policymakers had anticipated, he said.
Looking beyond current inflation developments, Escrivá said the rapid adoption of artificial intelligence represented another important source of uncertainty, though not necessarily a negative one.
He said it remained difficult to assess how much AI was already boosting investment, productivity and efficiency, and noted that understanding the timing of those effects would be important for estimating variables such as potential output and calibrating monetary policy.
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