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FRANKFURT, July 6 (Reuters) – The euro zone’s economy is not back to its state before the Iran war despite a \u200cdrop in oil prices, as core inflation remains strong and \u200cprice pressures continue, European Central Bank board member Isabel Schnabel said on Monday. <\/p>\n
Schnabel’s comments \u200bkept the need for more policy tightening on the table even as a second interest rate hike at the ECB’s next meeting on July 22-23 looked increasingly unlikely. <\/p>\n
“Does the decline in oil prices mean that \u200cwe are back to \u2060the pre-war situation? I don’t think so,” she told an event in Rome. <\/p>\n
“The peace deal is still fragile, \u2060markets continue to point to higher oil prices over longer horizons and gas prices are still around 40% higher than before the war.” <\/p>\n
Among other \u200bfactors, she \u200bnoted crack spreads, a measure of \u200bprofitability for refiners, were “twice their \u200cpre-war levels”, pipeline and supply chain pressures remained elevated and core inflation remained strong. <\/p>\n
“Meanwhile, we are experiencing new shocks: the heat wave in Europe and the Super El Ni\u00f1o may put upward pressure on food prices, while rainwater levels are approaching critical levels,” Schnabel added. <\/p>\n
Speaking \u200clater on the same panel, Belgian central \u200bbank governor Pierre Wunsch said he was “relatively \u200brelaxed”, noting the war-related \u200bshock to energy prices seemed to have “disappeared” from market \u200cprices. <\/p>\n
Repeating comments made to Reuters last \u200bmonth, he argued \u200bthe ECB should “not wait too long” if it wants to raise rates one last time. <\/p>\n
“We will have a projection in September, \u200bbut I’m a \u200cbit afraid that we would hike too late when the \u200bmovement starts in the other direction,” Wunsch added. <\/p>\n
(Reporting by Francesco \u200bCanepaEditing by Tomasz Janowski, William Maclean) <\/p>\n<\/p><\/div>\n