By Marta Vilar – SAN LORENZO DE EL ESCORIAL, Spain (Econostream) – European Central Bank Governing Council member José Luis Escrivá said on Wednesday that the situation in the Middle East following renewed US strikes on Iran was “very uncertain” and that the peace agreement remained fragile.
Speaking during the Q&A session of an event in San Lorenzo de El Escorial, Spain, Escrivá, who heads the Banco de España, said in response to an Econostream question that policymakers could not rethink monetary policy decisions every day in response to the latest developments in the conflict.
“There is clearly an uncertain situation,” he said, adding that the peace agreement was “fragile” in some ways.
Escrivá said the ECB should continue to monitor oil prices, oil production and the emergence of second-round effects.
“Not only is the price of oil important, how it evolves... but if we look at the average, clearly a large part of the increase that had occurred in futures prices has been corrected,” he said.
He said, however, that the reduction in oil supply “may not be sufficiently internalized in market price data.”
The ECB should also continue monitoring all components of inflation and assess whether the recent energy shock continued to pass through to broader prices, he said.
At the same time, policymakers should watch for second-round effects, which had not yet materialised, according to Escrivá.
He also pointed to economic activity as a key indicator, saying the euro area economy was “holding up well,” with recent data showing “strong resilience” and demand proving stronger than expected.
Looking ahead, the ECB should continue reassessing all incoming information at each meeting, weighing both inflationary risks and factors that could push inflation in the opposite direction, he said.
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