European Central Bank Vice President Guindos: June meeting must consider the impact of the Iran war on economic growth.

European Central Bank Vice President Luis de Guindos said that when deciding whether to raise interest rates next month, the ECB should carefully assess how severe the economic pressure from the Iran war is. The Spanish official stated that in the euro area, which has 21 member countries, while inflation responds quickly to the surge in energy costs, the impact on economic growth may take longer to materialize. He said policymakers cannot ignore this lagging effect. "We must consider the impact on growth," Guindos, whose term ends at the end of May, said on Wednesday. "If you look at soft indicators, confidence indicators, these indicators clearly show a significant impact on growth." These remarks indicate that Guindos is taking a dovish stance as his 8-year term comes to an end. Meanwhile, European Central Bank officials, including Executive Board member Isabel Schnabel and Greek Central Bank Governor Yannis Stournaras, have hinted at a rate hike in two weeks, partly due to the need to maintain the ECB's credibility after the inflation rate reached 3%. However, some also see economic damage: business activity in the euro area is contracting at the fastest pace in two and a half years. "The problem with this type of supply shock is that it will push up inflation, but at the same time weaken growth and reduce internal demand," Guindos said. "This decline in internal demand may alleviate inflation pressures."