MADRID, April 13 (Reuters) - The European Central Bank will assess whether to hike interest rates based on the second-round inflationary effects of the U.S.-Israeli war on Iran and its impact on
ECB rate rise will depend on effects of oil price surge, De Guindos says
Impact of Oil Price Surge on ECB Rate Decisions
MADRID, April 13 (Reuters) - Any European Central Bank rate rise will depend on how a war-fuelled surge in the cost of crude oil and some chemicals impacts other prices, ECB Vice President Luis de Guindos said on Monday.
ECB's Approach to Monetary Policy Amid Rising Energy Prices
"The rate hike will depend... on second-round effects," De Guindos told an event in Madrid, adding that the ECB would not be able to stave off the war's first impact with monetary policy, but would closely monitor its secondary effects.
Second-Round Effects and Policy Response
The ECB kept interest rates unchanged last month nL8N4070E2 but signalled it was ready to tighten policy if high energy prices seeped into the broader economy, impacting the price of other goods and services via so-called second-round effects.
Broader Economic Implications of Commodity Price Increases
Strait of Hormuz and Commodity Markets
De Guindos said that the partial closure of the Strait of Hormuz would not only push up energy costs, but other commodities such as aluminium, fertilisers and plastics were also likely to become more expensive.
Market Reactions and Future Rate Hike Expectations
Euro zone government bond yields edged up towards recent peaks on Monday after the United States and Iran failed to secure a deal to end the war, pushing oil prices higher and prompting traders to price in a 70% chance of a third ECB rate hike by December.
(Reporting by Jesús Aguado; Writing by David Latona; Editing by Francesco Canepa)
