European Central Bank Governing Council member Gabriel Makhlouf said Tuesday that a tentative deal between the US and Iran to reopen the Strait of Hormuz does not guarantee a fast improvement in inflation dynamics across the euro area.
Speaking in Dublin, the Irish central bank chief stressed that stopping hostilities does not immediately erase the economic shock they produced. He emphasized the uncertainty around how swiftly global supply chains will return to normal and how quickly energy prices will settle.
"An end to the conflict does not necessarily mean an immediate end to the shock,"
"It remains to be seen how quickly supply chains normalize and energy prices adjust."
Makhlouf’s comments echoed messages from other ECB policymakers who backed last week’s interest rate increase and warned that price pressures remain a concern. Those officials have highlighted the risk that inflation could remain elevated until underlying supply and production issues resolve.
The interim agreement between the US and Iran to reopen the Strait of Hormuz has coincided with a sharp decline in energy prices. However, Makhlouf cautioned that direct reductions in price pressures may not materialize immediately if the conflict has caused damage to infrastructure that delays production recovery.
"The direct price pressures might not fade so quickly if the infrastructure damage from the war means production only recovers with a lag,"
"Then there is the question of shipping through the Strait of Hormuz, on which there remains little clarity."
His remarks underline the ECB’s continued focus on inflation risks even amid developments that have eased commodity markets. They also reinforce why governing council members have supported a tighter monetary stance until there is clearer evidence that price pressures are abating for sustained reasons.
Context and implications
- Makhlouf highlighted that a diplomatic or military de-escalation is only the first step in restoring normal economic functioning.
- Energy markets reacted quickly to the news about the Strait of Hormuz, but the transmission to consumer prices depends on supply-chain and production recoveries.
- The ECB’s recent rate hike reflects concern that headline reductions in energy costs may not be sufficient to bring core inflation down without broader normalization.