Jose Luis Escriva, an ECB policymaker and the governor of the Bank of Spain, said on Friday that the European Central Bank is very unlikely to alter interest rates at its next policy meeting and that any decisions will be taken on a meeting-by-meeting basis.
Speaking on regional Catalan TV3, Escriva said the bank needs more time to fully assess the impact of the war in the Middle East before moving on rates. "With the information I have, I think it’s very unlikely that we will touch rates at the next meeting," he said, while noting that it is reasonable to expect effects from the conflict.
Escriva added that some consequences could be sharply limited if the war were to end quickly. "The effects on what matters to consumers – everyday prices – we are talking about tenths of a percent, not much more," he said.
He described the conflict as a factor that risks pushing up inflation and weighing on already sluggish euro zone growth by increasing energy costs and disrupting supply chains. Escriva referred to the situation as the U.S.-Israeli war on Iran, which has spread to other countries in the Gulf.
On the policy horizon, he stressed the ECB's medium-term orientation. "Our inflation target of 2% is a medium-term horizon, transitory movements should not necessarily lead us to make decisions. Instead, we must monitor the situation and assess to what extent this is having more persistent effects over time," Escriva said.
The ECB left rates unchanged at its February meeting and at that time signalled comfort with the outlook. This week’s developments, however, have materially shifted the backdrop amid worsening conflict and a jump in energy prices. Market participants have since increased the probability they attach to a possible ECB rate hike by December.
Escriva also commented on the potential diplomatic and trade fallout. He said it was too early to gauge the impact of any halt in trade between Spain and the U.S. after President Donald Trump threatened to cut commercial ties over Spain’s position on the conflict, noting that there has been no firm decision to that effect.
Overall, Escriva’s remarks underscore a cautious, data-dependent approach by the ECB as policymakers weigh the balance between temporary price swings and more persistent inflationary pressures amid international uncertainty.