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(Bloomberg) — European Central Bank Governing Council member Olaf Sleijpen said the full extent of the inflation shock from the Iran war isn’t yet clear and that policymakers will act accordingly as data arrive.
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While energy costs have retreated, uncertainty persists, the Dutch official told Bloomberg TV’s Francine Lacqua in Sintra, Portugal, where the ECB is holding its annual symposium.
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“A decline in the oil prices now, of course, is from an inflation point of view definitely good news,” he said Tuesday. “But it remains to be seen what is still in the pipeline.”
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Policymakers are studying how US-Iran peace talks and a drop in energy prices are affecting euro-zone inflation. The ECB raised interest rates this month for the first time since 2023 and markets still see one more quarter-point hike by year-end.
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Officials have indicated that further monetary tightening is likely. Data due Wednesday are set to show inflation in the 21-nation bloc dipped to 3% in June, remaining far above the ECB’s 2% target. The economy, meanwhile, is managing to avoid a recession.
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Sleijpen said he and his colleagues “haven’t really seen” second-round inflation effects yet, but that they’re closely watching developments over workers’ pay.
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“We know that wages are lagging, so let’s see when the first trade unions will come with their demands what they will be,” he said. “That’s another thing that at least personally I’ll definitely be looking at.”
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—With assistance from Nick Heubeck.
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English (US)