By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Thursday that nobody should try to predict the outcome of the Iran war yet, and that the ECB should “jointly” discuss next steps.
In the press conference presenting the annual accounts of the Deutsche Bundesbank, which he heads, Nagel said that the economic impact of the war would mostly depend on the duration of the conflict.
The main transmission channel would be energy prices, he said, noting that oil and gas prices had already risen significantly.
“As for monetary policy, the crucial factor is whether these are temporary supply shocks we should see through,” he said. “If the conflict comes to a swift end and a political agreement is reached and there is at most minimal damage to the infrastructure in the region, then energy prices could soon fall again.”
Given the current level of interest rates, the ECB was “well positioned” to keep inflation at 2% over the medium term in a sustainable way, he said.
The current environment was “very volatile,” and the ECB should respond “with caution,” he said.
“We strongly discourage anybody to determine what would happen at a too early stage because I don’t think that would be helpful,” he added.
The ECB would review all available information at its next meeting and “jointly discuss how to proceed,” he said.
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