ING: Middle East war threatens ECB's "good position" on policy

Golden Ten Data reported on March 11 that Carsten Brzeski from ING stated that the Middle East war is threatening the “good position” previously mentioned by the European Central Bank. With energy prices soaring, any discussion about rate cuts is now off the table. He said that the ECB’s judgment may be influenced by its experience in 2022, when it misjudged the energy price shock as temporary. However, Brzeski pointed out that the current situation is clearly different. “At this stage, the risk of a wage-price spiral appears to be very small.” Nevertheless, if a “prolonged war” scenario occurs, the ECB may be forced to take action, pushing for one or two rate hikes. ING expects the ECB will not adjust interest rates at its March 19 meeting, and also expects that the “good position” statement will not be mentioned again. Instead, the central bank may adopt a hawkish tone to curb inflation expectations and demonstrate readiness to raise rates if necessary.