ECB Officials Warn: Energy Price Shock from Middle East Conflict Still Limited

European Central Bank Governing Council member Olli Rehn emphasized that the energy-price shock resulting from the Middle East conflict has not yet had a significant impact on other parts of the economy. Speaking at an OMFIF event in London, he noted that energy prices remain the main driver of euro area inflation, while wage growth stays moderate.

Rehn's comments come as the ECB raised borrowing costs last week for a second time since fighting in the Middle East began, citing persistently high inflation above the 2% target and the region's economy showing resilience to the Iran war. People familiar with officials' thinking told Bloomberg that rates are expected to rise further.

Gabriel Makhlouf, Rehn's Irish counterpart, also expressed a cautious tone, stating that he would not rule out another rate increase next month if circumstances require it. He described each gathering as a 'live meeting,' indicating that officials will assess the situation on an ongoing basis and make decisions accordingly.