The ECB said in a blog a war involving Iran could push euro-area consumers' medium-term inflation expectations higher, strengthening the case for further rate hikes. It noted the 2022 Russia-Ukraine invasion and earlier geopolitical tensions left a "double hit" that has raised the probability households expect faster future price rises; policymakers are concerned energy-cost shocks could feed through into wages and corporate pricing. Short-term inflation expectations have risen markedly while me

The ECB said in a blog a war involving Iran could push euro-area consumers' medium-term inflation expectations higher, strengthening the case for further rate hikes. It noted the 2022 Russia-Ukraine invasion and earlier geopolitical tensions left a "double hit" that has raised the probability households expect faster future price rises; policymakers are concerned energy-cost shocks could feed through into wages and corporate pricing. Short-term inflation expectations have risen markedly while medium-to-longer-term expectations have changed little. Markets largely price a 25bp ECB hike in two weeks; euro-area inflation is 3% and likely to pick up, and the ECB flagged the risk that short-term expectations may be extended into the medium term, creating upside risk to medium-term expectations.