ECB Neger: paying close attention to the situation of energy prices in the Middle East adds to inflationary uncertainty

On 15 July, the ECB Board of Governors stated that the ECB was following the energy price trend closely after the renewed escalation of the Middle East conflict led to an increase in geopolitical uncertainty. He said that the past few weeks had been “filled with hope and disappointment”. The renewed outbreak of war between the United States and Iran underscores the fact that the current situation remains volatile. According to Neger: “The energy price trend is a key determinant of future inflation prospects. Monetary policy will continue to be highly vigilant.” The European Central Bank will convene a policy meeting from 22 to 23 July and will soon enter a quiet period before the Conference. It is generally expected that the bank will maintain interest rates at that time. However, investors still expect policymakers to raise interest rates again later this year to contain inflationary pressures triggered by the Iranian conflict. Neger stressed that, following a policy decision in June, borrowing costs were now at an “appropriate” level. He said: “From a monetary policy point of view, it remains wise to maintain a cautious response, but will also act decisively if necessary.” Kim Xian