The European Central Bank’s internal debate over whether higher energy prices will remain contained or spread more broadly through the euro area economy has sharpened again after Governing Council member Dimitar Radev said the institution must be ready to act quickly if inflationary pressure proves persistent.
On 7 April, Radev said inflation expectations may now react faster than in the past because recent shocks have left households and businesses more sensitive to renewed price rises.
The timing matters. The euro area is no longer dealing with a purely theoretical inflation risk. The ECB raised its 2026 inflation forecast on 19 March, citing higher energy costs and warning that price growth could move higher still if the conflict in the Middle East were prolonged. It now sees 2026 inflation at 2.6 per cent in its baseline scenario, above the 2 per cent target and above the 1.9 per cent projection published in December.
ECB concern over inflation risks linked to war-driven oil prices
Against that backdrop, Radev’s intervention is notable not because he announced an imminent move, but because he described a potentially shorter policy fuse. According to his remarks reported on 7 April, the ECB may have less time than before to judge whether an inflation shock is temporary. In earlier cycles, a jump in energy prices could be treated more cautiously while policymakers waited to see whether it fed into wages, services and broader expectations. Radev’s point is that the post-2022 experience may have changed behaviour. If economic actors now assume that one shock is likely to be followed by another, inflation expectations could become less stable and second-round effects could appear more quickly.
That does not mean the ECB has concluded that such a spiral is already under way. The same reporting makes clear that inflation expectations are still broadly aligned with the ECB’s target. Radev’s message is instead one of conditional readiness: if energy-driven inflation begins to spill over into wages, pricing behaviour or broader consumer expectations, the central bank should not wait too long before responding.
This is consistent with the broader tone that has emerged from Frankfurt since Bulgaria joined the euro area on 1 January 2026, bringing Radev onto the ECB Governing Council. At the ECB press conference on 5 February, President Christine Lagarde explicitly welcomed Bulgaria’s entry into the euro area and Radev’s arrival on the Council. Since then, eurozone policymakers have increasingly focused on whether renewed external shocks could force a shift from a relatively stable rates outlook to a tightening cycle.
Markets have already begun to price that risk. Reuters reported on 7 April that financial markets were anticipating several rate increases this year, with the first expected in June. Even if those expectations move again before the next policy meeting, the direction of travel is clear: investors no longer assume that the ECB will be able to look through energy-driven price pressure indefinitely.
For Brussels and eurozone readers, the practical issue is not simply whether the ECB raises rates. It is what threshold now triggers a policy response. Radev’s remarks suggest that threshold may be lower in one respect and unchanged in another. Lower, because policymakers may react more quickly if expectations start to drift. Unchanged, because the ECB still appears unwilling to respond to an isolated energy shock unless it sees evidence of persistence and transmission into the wider economy.
That distinction is important for governments as well as markets. If ministers respond to higher energy prices with broad subsidies or poorly targeted support, they risk sustaining demand and complicating the ECB’s inflation task. Radev warned that government support measures can aggravate inflation if they are not carefully designed. In other words, the next phase of eurozone inflation management may depend as much on fiscal discipline as on interest-rate decisions.
There is also a political dimension. Radev said separately on 7 April that Bulgaria’s shift to the euro on 1 January had produced only a modest and largely one-off inflation effect, which he estimated at 0.3 to 0.4 percentage points, while public support for the single currency had since risen. That matters because it gives added weight to his intervention inside the ECB: he is speaking not only as a new Governing Council member, but as the central bank governor of the euro area’s newest member state, one arguing that inflation credibility remains central to public trust in the currency.
The immediate conclusion is limited but clear. The ECB has not committed to a rate rise, and Radev has not argued that one is already necessary. But his warning on 7 April makes clear that the bar for waiting passively may be rising. If fresh energy shocks begin to alter expectations more quickly than in the past, the ECB’s response time may need to shorten with them.
