ECB’s Higher Rates Can’t Prevent More Shocks, Patsalides Says

European Central Bank Governing Council member Christodoulos Patsalides cautioned that there’s only so much officials can do to keep inflation shocks at bay.

“A central bank’s monetary policy cannot solve wars, fiscal problems, or supply chain issues,” the Cypriot governor told journalists in Nicosia after speaking to lawmakers there on Monday.

The remarks point to the challenge for the ECB in responding to a backdrop for consumer prices that depends closely on the duration of the Middle East war.

While policymakers have increased borrowing costs and are likely to do so again before the end of the year, Patsalides suggested that people should be realistic about the limits of what officials can achieve if the cost of gas or oil surges again.

“The ECB has raised interest rates,” he said. “Its policy is to make decisions based on the data, but the landscape has become highly unpredictable; everything could change by December. If inflation stems from other causes, the ECB cannot control it through interest rates.”