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Price stability & risks: Benign outlook vs potential concerns

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  • Hegemann, Hendrik
  • Wieland, Volker

Abstract

The ECB anticipates stable growth and inflation, while Europe is faced with geopolitical threats, lack of competitiveness and fiscal challenges. At such a time, central bankers need to consider the dynamics of risk scenarios that arise from potentially mis-aligned or mis-perceived trends and policy-relevant parameters and prepare for timely policy responses. This paper focusses on potentially unsustainable fiscal trends, potential growth misperceptions and their implications for inflation developments and the policy stance. It highlights risks for fiscal inflation in the euro area. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 26 February 2026.

Suggested Citation

  • Hegemann, Hendrik & Wieland, Volker, 2026. "Price stability & risks: Benign outlook vs potential concerns," IMFS Working Paper Series 235, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    • Handle: RePEc:zbw:imfswp:339584
    Note: Study requested by the ECON committee, Economic Governance and EMU Scrutiny Unit (EGOV), Directorate-General for Economy, Transformation and Industry
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