ECB’s Sleijpen says the Iran shock is more persistent than earlier thought but we don’t really see second-round effects yet

ECB’s Sleijpen says the Iran shock is more persistent than earlier thought but we don’t really see second-round effects yet.

The framing here is the classic supply-shock dilemma that energy-importing central banks have faced repeatedly: a persistent terms-of-trade hit pushes headline inflation up while dragging growth, and the policy response has historically hinged on whether expectations and wage-setting absorb the shock or look through it. Officials invoking the second-round test are signalling that the reaction function is conditional rather than pre-committed, which makes negotiated wage settlements, services inflation persistence, and medium-term expectations measures the operative inputs for the path, not the energy print itself. The distinction worth drawing is between a level effect that passes through and fades, which councils of this kind have generally chosen to tolerate, and a wage-price dynamic, which has historically triggered a tightening bias even into weak growth. Remarks of this kind from a single member tend to matter most as a read on where the hawkish centre of the Governing Council sits, and whether similar language migrates into the broader commentary and then the staff projections at the next forecast round. The transmission runs through the belly of the euro curve and inflation breakevens rather than the front end alone, since the claim is about persistence and pass-through, not about an imminent move. As commentary rather than a decision, the signal is conditional, and the tells are whether colleagues echo the persistence framing and how crude and European gas behave from here.