European Central Bank Vice President Luis de Guindos stated that the ECB should carefully evaluate how severely the Iran war is pressuring the economy when deciding whether to raise interest rates next month.

The Spanish official noted that in the 21-member eurozone, while inflation has reacted quickly to soaring energy costs, the impact on economic growth will take longer to become apparent. He emphasized that policymakers cannot ignore such lag effects.

"We have to consider the impact on growth," said Guindos, whose term ends in late May, on Wednesday. "If you look at soft indicators, confidence indicators, they clearly show a significant impact on growth."

These remarks represent a dovish tone from Guindos as he nears the end of his eight-year tenure. Meanwhile, other ECB officials, from Executive Board member Isabel Schnabel to Greek central bank governor Yannis Stournaras, have hinted at a rate hike in two weeks, partly to maintain the central bank's credibility after inflation reached 3%. However, some also see economic damage: business activity in the eurozone is contracting at its fastest pace in two and a half years.

"The problem with a supply shock of this nature is that it pushes up inflation, but at the same time it weakens growth and reduces internal demand," Guindos said. "This decline in internal demand could alleviate inflationary pressures."

He stated that price expectations remain "well anchored" and suggested that, in the updated forecasts the ECB will release next month, a recession "would not be the baseline scenario."

"I don't know if by then we will have a clearer view of the situation in the Middle East," he said. "But I think this approach is correct: the Governing Council will analyze all the new data and will take the Middle East situation into account."

Regarding financial stability, Guindos said that movements in sovereign bond markets have so far been "quite orderly." "We have seen a fairly generalized rise in yields, but spreads are under control," he added.