ECB Warns Inflation Pressures Will Persist

European Central Bank President Christine Lagarde has welcomed news of a preliminary agreement between the United States and Iran, saying it could help ease tensions in the Middle East and reopen the Strait of Hormuz.

Lagarde described the development as positive, provided it is followed by further steps, including the signing of a formal memorandum.

The prospect of an agreement has already helped push oil prices lower and reduced expectations of additional monetary tightening in the eurozone. Investors now expect just one more ECB interest-rate increase.

However, ECB Governing Council member Joachim Nagel struck a more cautious tone. He warned that even if shipping through the Strait of Hormuz resumes fully, inflationary pressures are unlikely to ease quickly.

According to Nagel, restoring oil supplies to pre-conflict levels could take months. As a result, inflation in the euro area is expected to remain elevated even under a more favorable energy-price scenario.

Lagarde also noted that uranium enrichment remains an unresolved issue and will require further negotiations between the parties.

(reuters, bak)