European Central Bank Governing Council member Olaf Sleijpen has stated that the central bank must closely monitor inflation expectations to assess whether the shock from the conflict in the Middle East is becoming more persistent.

Speaking in London, the Dutch central bank governor noted that while inflation expectations among investors and professional forecasters appear broadly stable, households' inflation expectations "appear less firmly anchored" to the ECB's 2% target.

"This is important because expectations influence wage formation and pricing behavior, which in turn affect overall inflation dynamics," Sleijpen said on Wednesday. "Well-anchored expectations allow us to look through temporary shocks. But increased divergence raises the risk that shocks are transmitted more widely. This requires close and continuous monitoring."