ECB governing council member Rehn warned a protracted 'war of attrition' in Iran
could keep euro-area inflation elevated and that the bank must prepare for that
risk. His remarks, ahead of markets pricing a 25bp hike next week, pointed to
higher energy prices after the near-closure of the Strait of Hormuz. 'We must
not be complacent in the face of these inflationary pressures,' Rehn said. 'We
cannot afford any burdensome crisis in Europe.' The comments mark a hawkish
shift from Rehn, who until recently placed greater weight on growth risks than
inflation, suggesting support for further tightening on the council has
broadened.
