Key insights
- ECB's Makhlouf expresses concern over persistent high energy prices due to the Middle East conflict, potentially leading to cost-push inflation and wage pressures. He emphasizes monitoring inflation expectations for de-anchoring. This hawkish tone from an ECB member suggests a cautious approach to future rate cuts, indirectly impacting global risk sentiment and potentially weighing on US equities.
DUBLIN, May 1 (Reuters) - European Central Bank Governing Council member Gabriel Makhlouf said he is concerned that energy prices may stay higher for longer without a clear timeline for the end of Middle East conflict and will be watching closely for knock on effects.
"I will be paying close attention to indirect effects, that is how higher energy prices are contributing to cost-push inflation in production, transportation, and services," Makhlouf said on his blog on the Irish central bank’s website on Friday, a day after the ECB left interest rates but debated hiking them.
"Potential second-round effects via wages will take longer to show up, given the staggered nature of wage-setting in Europe. In the meantime, inflation expectations need to be closely monitored for signs of de-anchoring."