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ECB May Consider Rate Hikes if Iran Conflict Persists
(MENAFN) A member of the European Central Bank’s (ECB) Governing Council indicated on Friday that the institution might need to increase interest rates if the ongoing war with Iran extends past June. However, he emphasized that policymakers are not hurrying to act until the full extent of the economic impact becomes clearer.
In an interview, Pierre Wunsch stated that the ECB would probably have to respond if the conflict remains unresolved by June, as this could push inflation significantly above the bank’s standard projections.
“If the conflict is not over by June, then we are most probably way above our baseline, and that would warrant some kind of reaction,” Wunsch remarked. He also mentioned that he feels “comfortable” with the market anticipating at least two interest rate increases this year.
Wunsch added that a rate adjustment as soon as April cannot be dismissed if emerging data indicate that the shock from rising energy prices will persist and contribute to more entrenched inflation.
“April is not out of the question,” he explained. “If by April we have solid evidence the shock will be lasting and will lead to a big high and inflation that is likely to have some degree of persistence, we might have to do something.”
These comments come as ECB officials evaluate whether escalating energy costs associated with the conflict could have broader repercussions on consumer prices throughout the eurozone.
In an interview, Pierre Wunsch stated that the ECB would probably have to respond if the conflict remains unresolved by June, as this could push inflation significantly above the bank’s standard projections.
“If the conflict is not over by June, then we are most probably way above our baseline, and that would warrant some kind of reaction,” Wunsch remarked. He also mentioned that he feels “comfortable” with the market anticipating at least two interest rate increases this year.
Wunsch added that a rate adjustment as soon as April cannot be dismissed if emerging data indicate that the shock from rising energy prices will persist and contribute to more entrenched inflation.
“April is not out of the question,” he explained. “If by April we have solid evidence the shock will be lasting and will lead to a big high and inflation that is likely to have some degree of persistence, we might have to do something.”
These comments come as ECB officials evaluate whether escalating energy costs associated with the conflict could have broader repercussions on consumer prices throughout the eurozone.
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