ECB Chief Economist: Inflation Will Persist Despite US-Iran Agreement

On June 16, Philip Lane, the Chief Economist of the European Central Bank, stated that preparations must be made for inflation triggered by the Middle East conflict, which has yet to manifest. Despite the announcement of an agreement between the United States and Iran to reopen the Strait of Hormuz, oil prices have not simply returned to pre-crisis trajectories. 'Energy prices have remained high for four consecutive months, which means we can expect inflation rates to exceed 3% in the future,' he said, adding, 'This will have indirect effects on food, goods, and services this year and even next year.' Lane indicated that crude oil prices are unlikely to significantly drop from the current level of $80 to $81 per barrel, and noted that the forward curve is 'essentially flat for the coming years.' He remarked, 'Based on market pricing, we will not see a significant drop back to pre-war levels. However, prices will not reach the much higher levels we previously envisioned under adverse or severe scenarios.'