Repeat of 2022 inflation woes less likely but not excluded, ECB's Sleijpen says
ECB Policymaker Olaf Sleijpen Discusses Inflation Risks and Monetary Policy
By Marc Jones
Outlook on Inflation and Interest Rates
LONDON, June 17 (Reuters) - A repeat of the 2022 inflation shock that sent interest rates to their highest level in decades looks less likely at the current juncture but can't be entirely excluded, Dutch European Central Bank policymaker Olaf Sleijpen said on Wednesday.
Second-Round Effects and Monetary Policy
"For monetary policy, the key issue is again the risk of second-round effects," Sleijpen said in a speech at an event organised by the European Economics and Financial Centre (EEFC) in London.
Impact of Geopolitical Developments on Oil Prices
This week's framework peace deal between the United States and Iran after nearly four months of war in the Middle East has also pushed down both spot market oil prices and market expectations for future levels, he added.
Likelihood of a Repeat Inflation Shock
"A repeat of 2022 appears less likely, but it cannot be excluded," Sleijpen said.
ECB's Response to Inflation and Economic Challenges
Recent Interest Rate Decisions
The ECB raised its interest rates for the first time in nearly three years last week and left the door open to more if the surge in fuel costs caused by the now-suspended Iran war begins to drive up prices and wages more broadly.
Challenges Facing ECB Policymakers
Sleijpen said ECB rate-setters are facing a "demanding task" in seeking to distinguish between inflation that will persist and something that will pass.
They are also grappling with an unusually complex economic backdrop, where geopolitical, tariff and energy price strains are all intertwined, he said.
ECB's Commitment to Price Stability
However, Sleijpen added, their job is clear: "To ensure that temporary shocks do not become lasting inflation, to keep expectations anchored, and to make sure that inflation stabilises at our medium-term target."
(Reporting by Marc Jones; editing by Balazs Koranyi in Frankfurt and Gareth Jones)