The prospect of peace between the United States and Iran may remove the risk of a new energy explosion, but it does not seem able to substantially change the European Central Bank (ECB)'s attitude towards inflation.
ECB officials say that even if oil flows are restored through the Straits of Hormuz, the economic effects of the war have already left a deep footprint on the European economy and may require further interest rates increases.
ECB President Christine Lagarde, and other members of the Board of Directors positively welcomed the prospect of deescalation in the Middle East, but make it clear that they do not regret the recent increase in interest rates and do not consider that the fight against inflation has been won.
"The damage does not fade from one day to the next"
The Governor of the Central Bank of Slovakia and a member of the Governing Council of the ECB, Peter Kazimir, warned that high energy prices would continue to affect the economy for a long time. "The increased energy costs will probably remain with us longer than many hoped," he said. As he pointed out, even if the peace agreement between the US and Iran is implemented, the damage caused to the Middle East cannot be restored immediately.
The main concern of central bankers is that it will take considerable time to restore energy infrastructure, restart production and fully re-establish navigation in the Straits of Hormuz. At the same time, the need to replenish strategic oil reserves may keep crude prices high for a long time.
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