- Iran conflict creates risk to growth and inflation
- Two supply shocks happening at a global level
- We reaffirm our strong commitment to price stability, this is a strong collective commitment
- Monetary policy will remain data dependent
- Global central bankers are monitoring second-round effects
- We are ready to act as much as necessary
ECB's Villeroy stressed that the US-Iran conflict created a dual supply shock at a global level. This disrupts supply chains and elevates energy costs, threatening to simultaneously stall economic expansion and exert upward pressure on consumer prices.
In the face of these shocks, central bankers are maintaining a unified front. Villeroy reaffirmed a strong, collective commitment to maintaining price stability across the Eurozone, emphasizing that anchoring long-term inflation expectations remains the primary objective.
However, the path forward will not be dictated by predetermined timelines. Instead, Villeroy reiterated that monetary policy is set to remain strictly data-dependent. Central banks are monitoring wage growth metrics, core inflation trajectories and inflation expectations before adjusting their monetary stances.
Policymakers are closely monitoring potential second-round effects, which occur when initial spikes in energy and raw material costs filter into the broader economy, driving up core prices and wage growth. To mitigate this risk, Villeroy reiterated that the ECB is fully prepared to act as much as necessary.
