Välimäki sees limited inflation spillovers from energy shock
Bank of Finland Board Member Tuomas Välimäki said the renewed energy shock raises inflation risks but has not fundamentally changed underlying price pressures. Euro area inflation reached 3.8 percent in September, largely because of energy.
Energy lifts prices, not wages
Speaking in Helsinki on November 2, 2026, Välimäki said higher oil and European gas prices were already lifting headline inflation.
The shock has grown in magnitude and duration, increasing upside inflation risks.
Yet evidence of broader, persistent effects remains limited: underlying inflation is broadly stable, wages show no material response and medium- and longer-term inflation expectations remain anchored.
Labor market tightness has also eased from post-pandemic highs.
The European Central Bank (ECB) Governing Council kept key rates unchanged at its previous meeting.
Välimäki said policy must distinguish between an energy-driven rise in headline inflation and a lasting change in price dynamics.
Growth faces opposing forces
Euro area activity continues to expand, supported by AI-related investment, digitalization and public spending on infrastructure and defense.
Higher energy costs nevertheless erode household purchasing power and raise business costs.
Long-term rates have risen, financing conditions have tightened and consumer confidence has weakened.
The Governing Council will decide meeting by meeting using incoming data.
Its December meeting will have new projections, inflation and wage data, plus further evidence on the energy shock.
Persistence is the policy test
The policy question is whether energy inflation spreads, not whether it initially raises prices.
Välimäki rejects a mechanical rate response because the shock also weakens growth.
The medium-term objective remains 2 percent inflation, while the rate path depends on evidence of persistence.
Source: The path back to 2 % has become less comfortable
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