By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Emmanuel Moulin said on Tuesday that the recent agreement reached by the US and Iran was “good news” but warned that a return to normalcy would take time.
In an interview with French daily Les Echos, Moulin, who heads the Banque de France, said the institution was not expecting a recession in the French economy this spring.
“We anticipate sluggish growth in the second quarter, as the impact of the war in Iran, which began on February 28, will be felt throughout the entire quarter,” he said. “Our business survey shows that May was somewhat challenging for industrial production and services, but that business leaders' sentiment is more positive for June.”
While describing the US-Iran agreement as “good news”, Moulin said the 60-day period of negotiations on “very difficult issues” suggested it should be viewed with caution.
“A return to normalcy will take time,” he said. “The Strait of Hormuz needs to be cleared of mines, the congestion caused by waiting ships must be removed, production sites damaged by the war must be repaired, strategic stockpiles must be replenished, and so on.”
Moulin described the energy shock as “persistent.”
He said companies in France had begun passing higher energy costs on to consumers, though the pass-through had been uneven across sectors, with energy-intensive industries and air and road transport services among the first to be affected.
Asked whether he was concerned about second-round effects through higher wages, Moulin said that “[f]or the time being, there are only a few, as wage negotiations were concluded before the war in the Middle East.”
The 2.4% increase in the minimum wage on June 1 would trigger an upward adjustment of sectoral minimum wage scales, he said, noting that the impact on other wages would come with a lag.
“We expect wages to catch up, but not a price-wage inflationary spiral,” he added.
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