By Marta Vilar – SAN LORENZO DE EL ESCORIAL, Spain (Econostream) – European Central Bank Governing Council member José Luis Escrivá said on Wednesday that if the recent decline in oil prices were to persist, the factors that had concerned policymakers would gradually ease, while noting that the outlook could change quickly.

Speaking at an event in San Lorenzo de El Escorial, in Spain, Escrivá, who heads the Banco de España, said that the Middle East conflict had reduced global oil production by 12%.

The sustained rise in oil prices over recent months had "started to be transmitted to other prices in the economy," he said.

Monetary policy could normally look through one-off energy price shocks, Escrivá said, but added that policymakers had begun to see indirect effects over recent months, pointing to rising services inflation, transport costs and food prices.

“That has led us to react,” he said, citing headline inflation picking up above 2% and not returning to target before 2027. “As a result of this, we raised interest rates by 25bp in the Governing Council’s last meeting. It is a moderate increase.”

Given the current uncertainty, the ECB needed to remain "very agile", assessing incoming data and alternative scenarios at every meeting rather than relying on a single baseline projection, he said.

“The truth is that the United States-Iran agreement has resulted in a very sharp decline once again in the price of oil,” he said. “Not exactly to pre-war levels, and if that continues for some time, then probably the elements that concerned us the most would be diminishing, but this changes from one day to the next.”

The ECB therefore needed to keep "all options open" on a meeting-by-meeting basis, he said.

 

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