Middle East Conflict Has Not Yet Hit Euro Area Economy: ECB

European Central Bank Governing Council member Olli Rehn said that the energy-price shock from the Middle East conflict has not yet affected other parts of the economy. Speaking at an OMFIF event in London, Rehn stated that energy prices remain the main driver of euro area inflation while wage growth stays moderate.

Rehn noted that second-round effects or any price-wage spiral have been absent so far. This comes as the ECB raised borrowing costs last week for a second time since fighting in the Middle East began due to inflation remaining well above the 2% target and the region's economy showing resilience to the Iran war.

Gabriel Makhlouf, Rehn's Irish counterpart, also expressed that he would not rule out another rate increase next month if circumstances require it. He emphasized that every gathering is a 'live meeting' and officials will take each decision as it comes.