Wen Shi: If the Iran conflict is delayed until June, the European Central Bank may raise interest rates.

European Central Bank (ECB) Governing Council member Pierre Wunsch stated that if the conflict in Iran is not resolved by June, the ECB may have to take action to raise interest rates.

ECB President Christine Lagarde also indicated earlier this week that the ECB will act decisively and swiftly when necessary, but is currently in a phase of ongoing assessment of the war’s impact on the economy. Officials overall exhibit a readiness to tighten, but are not in a hurry to act.

Wunsch, who is also the Governor of the National Bank of Belgium, said in an interview with foreign media on Friday that if there is conclusive evidence by April indicating that the shock will persist and lead to a significant rise in inflation, with the upward trend likely to have some degree of persistence, then the ECB may have to take action.

Wunsch stated that if the conflict is still ongoing by June, the situation is likely to be well above the ECB’s baseline assumptions, which would require some form of response. He feels reassured by market bets that the ECB will raise interest rates at least twice this year.

Wunsch also urged the ECB to remain patient and allow officials to assess the extent of the war’s economic impact. While policymakers are prepared to tighten monetary policy, they are not in a rush to take measures that may appear to be an overreaction.

He mentioned that slowing economic growth could ultimately limit second-round price effects. Nevertheless, he still believes that it is possible for the ECB to take interest rate action as early as next month.