ECB's Nagel says no inflation relief in sight even if Hormuz Strait reopens soon
- US and Iranian officials said overnight they have reached an agreement to end their war and reopen the Strait
FRANKFURT: European Central Bank policymaker Joachim Nagel said on Monday there would be no immediate relief from an energy-driven spike in inflation even if the Strait of Hormuz reopens soon because it will take months for oil supply to recover to its pre-war level.
US and Iranian officials said overnight they have reached an agreement to end their war and reopen the Strait, a gateway for energy shipment, in a preliminary pact that sent oil prices falling.
But Nagel reaffirmed his view that all options - meaning both holding interest rates steady or increasing them - remain for the central bank’s next policy meeting on July 22 to 23.
“No relief is in sight for the foreseeable future,” Nagel said.
“On the contrary: even if the Strait of Hormuz were to become navigable again soon, it will take months for the oil supply to return to normal.”
The ECB raised interest rates for the first time in nearly three years last week to try to curb inflation before the surge in energy costs, which has followed unprecedented supply disruption linked to the Iran war, spreads further across the euro zone economy.
Nagel said another increase in inflation should be expected when government measures to limit energy price rises expire.
These measures, which include a fuel price discount at the pump in Germany, dampened the inflation rate in the euro zone by 0.4 percentage points in May, Nagel said.
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