- Too soon to say if ECB needs to act in June
- Need to pay close attention to inflation
The Bank of France nominee Emmanuel Moulin, who is going to replace Francois Villeroy as the next ECB governor, said that it’s still too early to commit to any specific action at the upcoming June meeting. He emphasized that policymakers need to be patient and gather a more substantial set of economic data before adjusting interest rates.
Moulin said that the ECB needs to pay close attention to inflation dynamics across the eurozone. Policymakers are particularly focused on the threat of second-round effects, a phenomenon where initial price shocks feed into broader wage growth and domestic demand, potentially embedding higher prices deeper into the economy.
The market is pricing in an 85% chance of a rate hike in June and as other ECB policymakers noted, that’s likely to be the case unless the Strait of Hormuz is reopened and oil prices fall significantly before then.
