European Central Bank Vice President Luis de Guindos stated that uncertainty stemming from the conflict involving Iran necessitates a prudent approach to interest rate setting by the central bank. "In a highly uncertain environment, we need to analyze the data with caution and calmness," he said on Tuesday in Madrid. He emphasized that monetary policy is not a panacea and cannot prevent initial price shocks. "However, we can prevent second-round effects and a de-anchoring of inflation expectations." "We do not know what will happen tomorrow or the day after," Guindos remarked. "The Strait of Hormuz is closed one moment, open the next, then closed again. They are negotiating, and this will be a crucial factor. It will be a primary factor determining the path of inflation and the trajectory of expectations." He stressed that the economic impact of the Middle East conflict is significant.
Comments