Stagflation likely over oil surge: ECB

EUROPEAN Central Bank governing council member Vitor Constancio said surging oil prices may lead to a period of stagflation, when inflation accelerates and economic growth stagnates.

“The price of oil is another problem that could create situations of stagflation,” Mr Constancio, who heads Portugal’s central bank, told legislators in Lisbon yesterday.

The comment highlights the dilemma facing the ECB as it considers whether to raise interest rates further to contain price increases.