By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member José Luis Escrivá said on Friday that it is “very unlikely” the ECB will raise interest rates at its next meeting, adding that the initial inflationary effects of the Iran conflict could be offset if demand weakens.

In an interview with Spanish broadcaster TV3, Escrivá, who heads the Banco de España, said that the conflict in the Middle East could negatively impact the global economy.

“The effects it is already having on the price of fossil fuels are significant, and we should not overlook the impact it could have on the confidence of economic agents,” he said.

The overall impact of the conflict would largely depend on how long it lasts, which is difficult to anticipate, he said.

Escrivá noted that the European economy had “proven extraordinarily resilient” to recent shocks, including the introduction of tariffs.

“I think we can assume that with the closure of the Strait of Hormuz and the rise in oil prices—even if the situation were later reversed—it would still take several months for things to return to normal,” he said, adding that gas prices had already increased and the market impact on Asia had been significant.

If the situation were reversed quickly, the day-to-day impact on prices would likely be limited to a few tenths of a percentage point, he said.

Escrivá added that the ECB would likely need more time than remains before its next meeting to gather sufficient information to determine whether the developments will have a significant economic impact.

“If you have a supply shock, on the one hand you have a direct increase in oil and commodity prices that can push inflation up, but if at the same time there is a reduction in demand, that works in the opposite direction and may offset the impact on prices,” he said.

From today’s perspective, he added, it is “very unlikely” that the ECB will change interest rates at the March meeting.

 

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