ECB's Sleijpen: 2022 inflation repeat less likely but not ruled out
ECB board member Sleijpen said a repeat of the 2022 inflation spike is less likely but cannot be excluded, with second-round effects remaining a key risk for monetary policy.
European Central Bank board member Frank Elderson (Sleijpen) said on Tuesday that a repeat of the 2022 inflation surge is less likely but cannot be completely ruled out, as second-round effects remain a key concern for monetary policy. The comments come as markets digest the ECB's recent rate decisions and look ahead to further guidance.
Sleijpen noted that market expectations point to a declining path for oil prices, but uncertainty persists. For foreign exchange traders, the key takeaway is the ECB's vigilance on inflation persistence. If second-round effects materialize, the ECB may need to maintain or even tighten policy, which would support the euro through wider rate differentials. Conversely, if inflation continues to ease, the ECB could cut rates sooner, weighing on the euro. Live fx prices and charts on NowPrice show the euro trading around 1.1599, down 8 pips on the day, as traders await further comments from US Treasury nominee Warsh.
The ECB's stance will be crucial for euro-dollar direction in the coming months. Traders should watch for upcoming eurozone inflation data and ECB speeches for clues on the pace of policy normalization. Any signs of sticky inflation could reinforce the ECB's hawkish bias, while a sharper-than-expected slowdown might open the door for earlier rate cuts. The uncertainty around oil prices adds another layer of complexity for inflation forecasts and central bank reaction functions.