- ECB Governing Council member Pierre Wunsch stated that the initial shock from Iran-related energy disruptions has dissipated.
- He noted that second-round effects on inflation have not materialized to a significant degree.
- The remarks suggest the ECB may maintain a cautious but data-dependent policy stance.
The European Central Bank's Pierre Wunsch said Thursday that the inflationary shock stemming from geopolitical tensions in Iran has largely faded, with no substantial second-round effects detected so far. Speaking at an event in Brussels, Wunsch noted that while energy prices initially spiked, the pass-through to broader inflation has been limited.
"It seems that the shock has disappeared," Wunsch said, referring to the impact of Iran-related disruptions on eurozone inflation. "We haven't seen that many second-round effects." His comments come as the ECB weighs whether to adjust its monetary policy stance amid evolving energy market dynamics.
Second-round effects typically refer to the risk that temporary price increases feed into wages and core inflation, becoming entrenched. Wunsch's assessment aligns with recent data showing eurozone inflation easing, although energy prices remain volatile. The ECB has maintained a data-dependent approach, with markets pricing in potential rate cuts later this year.
Wunsch acknowledged that uncertainties persist, particularly regarding energy supply routes and geopolitical developments. However, he emphasized that the current trajectory supports the view that the impact was transitory. The ECB is expected to release updated economic projections in June, which will incorporate the latest energy price trends.
Attempts to reach other ECB officials for comment were not immediately successful. The central bank has previously warned that second-round effects could still emerge if energy costs remain elevated. For now, Wunsch's remarks provide a relatively optimistic outlook, suggesting the ECB may be less inclined to tighten policy further.