European Central Bank (ECB) Governing Council member Gabriel Makhlouf expressed concern about the potential for a 'higher-for-longer' energy price scenario due to the ongoing conflict in the Middle East, noting the absence of a clear timeline for its resolution [1]. Makhlouf emphasized the importance of closely monitoring inflation expectations for any signs of de-anchoring, highlighting the risk that persistent energy price pressures could feed into broader inflation dynamics [1].
He stated that he would be paying particular attention to indirect effects such as cost-push inflation in production, transportation, and services, which could be exacerbated by sustained high energy prices [1]. Makhlouf also noted that potential second-round effects via wages are likely to take longer to materialize, given the staggered nature of wage-setting processes [1].
In terms of market reaction, the EUR/USD currency pair remained resilient, trading in positive territory above 1.1750 during the American session following Makhlouf's comments [1]. No specific forward-looking statements or analyst opinions were provided beyond Makhlouf's remarks.
CONCLUSION
ECB's Makhlouf's comments underscore the central bank's vigilance regarding inflation risks stemming from prolonged energy price pressures. The market response was relatively muted, with EUR/USD holding steady, indicating that investors are attentive but not alarmed by the current outlook.