Key insights
- ECB chief economist signals likely upward revisions to inflation forecasts and downward revisions to growth forecasts in June, citing the Middle East conflict and elevated oil prices. While increased US natural gas supply may offer some cushion, net upward pressure on inflation is expected. This could lead to a more hawkish ECB stance, indirectly impacting US equities through global economic headwinds and potential dollar strength.
TOKYO, May 26 (Reuters) - The European Central Bank will likely revise its inflation and growth forecasts next month reflecting the darkening outlook from the Middle East conflict, its chief economist Philip Lane told Nikkei newspaper in an interview published on Tuesday.
"There are several factors related to the Iran war that show that the macroeconomic outlook has gotten worse," Lane said in an interview with the Japanese business daily.
He also said oil prices were expected to remain elevated for longer compared with the ECB’s assumptions in March. While increased U.S. natural gas supplies could help cushion the energy market, "on net, I still think that there has been upward pressure on inflation," he said.
"We are likely to make a further upward adjustment to the inflation forecast in June," Lane said in the interview.
The ECB revises its growth and inflation projections every three months. The next revision comes on June 11.