Broader Israel conflict could drive up inflation, ECB’s Knot says -October 09, 2023 at 07:00 am EDT

AMSTERDAM, Oct 9 (Reuters) – Fighting between Israel and
Hamas could drive up inflation in the euro zone if other nations
in the region get involved in the conflict, thereby sustaining a
current spike in oil prices, ECB policy maker Klaas Knot said on
Monday.

“If the conflict drives up the oil price significantly for a
long time, that would of course be a new upward shock for
inflation,” Knot told reporters at the Dutch central bank.

“I wouldn’t expect a lasting effect on the oil price if it
remains a regional conflict between Israel and Gaza, but that
could change if other large nations in the region get involved,”
the Dutch central bank governor said.

“Western countries, however, are far less dependent on oil
from the Middle East nowadays than they were in the 1970s, so we
can’t simple compare this era with what happened then,” he said.

Knot said he was comfortable with the current level of
interest rates, but added the ECB would continue to closely
monitor energy prices and wage data to see if risks to the
inflation outlook were worsening.

“For now, inflation risks are more balanced than they have
been for a long time,” he said. “We will monitor meeting by
meeting whether this remains the case.”

(Reporting by Bart Meijer
Editing by Bernadette Baum)