European Central Bank committee: Eurozone monetary policy will depend on the scale of the energy supply disruption.

Member of the ECB Governing Council and Governor of the Bank of Greece, Yannis Stournaras, stated on Monday that the appropriate monetary policy direction for the Eurozone will depend on the scale and nature of the energy supply disruptions caused by the Middle East conflict. He noted that if the surge in energy prices proves to be temporary, the need to adjust monetary policy will be limited. However, if the increase in energy prices leads to stronger and longer-lasting pressure, affecting medium-term inflation expectations and wage growth trends, a tighter monetary policy stance is expected to be required. The European Central Bank will announce its next interest rate decision on April 30th. Currently, ECB officials are considering whether to raise borrowing costs to prevent the surge in energy prices resulting from the Middle East conflict from evolving into broader inflationary pressures. For the global energy market already facing severe supply shortages, the only short-term solution is the reopening of the Strait of Hormuz. The International Energy Agency (IEA) warned last month that the scale of the damage caused by the Middle East conflict to the global energy supply chain is unprecedented, and the repair period will be lengthy. The IEA stated that the Middle East conflict has led to "serious or extremely serious" damages to over 40 energy facilities in nine countries, with the restoration of production in oil fields, refineries, and pipelines requiring a considerable amount of time. This impact is equivalent to the combined effects of the two major oil crises of the 1970s and the natural gas crisis triggered by the 2022 Russia-Ukraine conflict. IEA Executive Director Fatih Birol warned that if the Strait of Hormuz remains closed to shipping, the amount of crude oil and refined products lost in April will be double that of March. Even if the conflict ends, it will take a long time to return to normal. In recent times, several ECB policymakers have expressed their views on the policy outlook. Member of the ECB Governing Council and Governor of the Bank of Estonia, Madis Muller, stated that if the Middle East conflict results in prolonged high oil and gas prices, he cannot rule out the possibility of a rate hike at the April policy meeting. Muller said, "It is difficult to say where we will be by the end of April. If energy prices remain high in the long term, we certainly cannot rule out the possibility of adjusting interest rates as early as April." Muller stated that he will closely monitor wages and the labor market, considering them as key indicators of broader inflationary pressures, and will differentiate between goods and services where energy is an important input, such as airlines. He said, "In order to maintain purchasing power, people need to start demanding higher wages." He also added that policymakers must also focus on market and consumer long-term inflation expectations. ECB President Christine Lagarde has pledged to take decisive action if necessary. Governor of the Bank of France, Francois Villeroy de Galhau, stated that although the ECB is prepared to take action, it is "still too early to debate when to act specifically." Pierre Wunsch, Governor of the National Bank of Belgium, stated that if the Middle East conflict is not resolved by June, the ECB may have to take action. However, he also called for patience in the markets so that officials can fully assess the extent of the conflict's impact on the economy. He pointed out in an interview that while policymakers are prepared to tighten monetary policy, they will not rush to implement measures that could be seen as overreactions. President of the Bundesbank, Joachim Nagel, stated that if concerns about a surge in inflation in the Eurozone due to the Middle East conflict arise, the ECB will have the "option" to raise rates at the next interest rate meeting. He noted that by the meeting on April 29th to 30th, he and his colleagues will have sufficient information about the progress of the war and its economic impact to decide whether to take action on raising rates. When asked about the possibility of a rate hike in April, he said, "It is indeed an option, but it is just one of the options."