ECB's Schnabel says Iran shock is not over

ECB board member Isabel Schnabel said the euro zone is not back to a pre-war inflation environment despite the recent drop in oil prices, arguing that core inflation and other supply-side pressures remain elevated. She pointed to gas prices still about 40% above pre-war levels, crack spreads at roughly twice pre-war levels, and lingering pipeline and supply-chain disruptions. She also warned that new shocks such as Europe’s heat wave and a possible Super El Niño could lift food prices further. The comments kept alive the possibility of additional ECB tightening, even though a second rate hike at the July 22-23 meeting was becoming less likely. Belgian central bank governor Pierre Wunsch sounded more relaxed, saying the energy shock appeared to have faded from market pricing but warning the ECB should not wait too long if it intends to hike again.