Pablo Hernández de Cos, a contender to lead the European Central Bank, warned that prolonged energy price pressures from the Iran war could threaten inflation control. He urged policymakers to stay alert to signs of broader price increases.
De Cos, the former Spanish central bank governor who now heads the Bank for International Settlements, said higher energy costs have not yet triggered widespread increases in wages and other prices. He noted that expectations the conflict would end quickly and ease energy prices have not been met.
Euro-area inflation is running at roughly twice the ECB's 2% target. De Cos said any interest-rate increases should respond to evidence of inflation risks in incoming economic data, not to assumptions about how energy markets might develop.
He also expressed concern about countries maintaining large budget deficits despite historically high public debt, particularly as higher interest rates make debt servicing more expensive. The report says France has become a focus of investor concern over fiscal strains.
De Cos is one of two candidates to succeed Christine Lagarde as ECB president, alongside former Dutch central bank chief Klaas Knot. Euro-area finance ministers are scheduled to assess the candidates on Monday, though European leaders will make the final appointment. De Cos did not directly address his candidacy in the interview published Saturday.