ECB’s Makhlouf highlights persistent eurozone price pressures, signaling a cautious rate-cut approach despite the Iran deal’s potential to lower energy costs.
ECB's Makhlouf warning on persistent price pressures dampens expectations for rate cuts, supporting the euro. His hawkish tone amid the Iran deal suggests the ECB will lag other central banks in easing, widening rate differentials in EUR's favor.
His hawkish remarks reduce the probability of near-term ECB rate cuts, supporting the euro against the dollar as interest rate differentials widen in EUR's favor.
Makhlouf suggests not; while energy prices may fall, domestic price pressures remain, so the ECB is likely to maintain restrictive policy for longer.
Persistent inflation pressures as flagged by Makhlouf imply the ECB may delay cutting rates, keeping German bund yields elevated. The Iran deal could initially lower energy costs, but core inflation fears dominate, so bunds may not rally.
Because investors price out rate cuts, increasing the opportunity cost of holding fixed-income assets, pushing yields up and prices down.
Possibly, if significantly lower energy prices filter through to core inflation, but Makhlouf's warning suggests the ECB is not convinced yet.
ECB Governing Council member Gabriel Makhlouf stated that underlying price pressures in the eurozone persist despite the Iran nuclear deal, signaling a cautious stance on interest-rate cuts. His comments suggest the ECB prioritizes domestic inflation over geopolitical tailwinds that may lower energy costs. The remarks undermine expectations for near-term policy easing, potentially supporting the euro while keeping European bond yields elevated.
He indicated that price pressures in the eurozone remain persistent despite the Iran nuclear deal, suggesting the ECB may not rush to cut interest rates.
The deal could lower global oil prices, easing headline inflation, but Makhlouf's comments imply underlying inflation remains too high, so the ECB will focus on core measures.
Hawkish rhetoric supports the euro by reducing expectations of near-term rate cuts, potentially strengthening EUR/USD and EUR/GBP.