ECB economists say AI investment and a greener economy helped the euro zone weather the energy shock

European Central Bank economists said on Wednesday that fiscal support and an investment boom in artificial intelligence are helping to sustain growth in the euro zone¹.

In their account, a greener economy and AI spending have helped the bloc weather the energy shock¹. The analysis was published on the ECB’s blog under the title “Resilience of the euro area economy – weathering one shock, preparing for the next”².

The same day, Governing Council member Martins Kazaks said more tightening may be needed, and that interest rates may have to be lifted further depending on how consumer-price gains develop³.

Why it matters to investors

The two messages point the same way. If the economy is proving resilient to the energy shock, the case for holding back on tighter policy weakens, and Kazaks has said further increases may be needed^1,3.

The ECB has already raised its policy rate twice, to 2.5%^5,6. Nordea expects two further increases⁵.

Markets are pricing a pause before the next move. Investors expect the ECB to hold rates steady at its meeting next week, while expecting an increase in December⁴.

A comparison published on Wednesday notes that, faced with the same set of circumstances, the ECB has increased its main official rate twice, though only to 2.5%⁶.

The title of the staff analysis, which speaks of preparing for the next shock as well as weathering this one, signals that the ECB’s economists see the present resilience as a buffer that may be tested again².

What to watch

The staff analysis is the ECB’s own reading of the economy, and it should be weighed as such; the claim that AI investment and the energy transition are cushioning the shock is the central bank’s assessment rather than a measured outcome^1,2.

European shares edged higher on Wednesday as strong company earnings offset worries about unrest in France⁴. The gains came on the same day that a policymaker raised the prospect of further increases³.

The next test comes at next week’s policy meeting, where a hold is expected, and then in December, when investors expect an increase⁴. How consumer-price gains develop will decide whether the further rises Kazaks described materialise, and whether the two additional increases Nordea forecasts follow^3,5.