A Reuters article is making the rounds saying that a June rate hike is “nearly sealed”
- ECB officials see a June rate hike as nearly certain, with persistent high energy costs keeping inflation pressures elevated.
- The ECB is likely to avoid committing to a July hike, preferring to keep options open and remain data dependent.
Inflation risks have increased as elevated energy prices continue to pressure the outlook, with no visible peace agreement involving Iran in sight. Headline inflation is already running at 3%, well above the ECB’s 2% target, reinforcing the case for a June rate hike. Officials also acknowledge that even if a peace agreement is eventually reached, energy prices could remain elevated for some time before markets fully stabilize.
At the same time, policymakers remain increasingly concerned about the growth outlook. Weak economic activity, softer labor market conditions, and slowing demand are expected to help dampen inflation pressures over the medium term. As a result, while a June hike appears increasingly likely, the ECB is expected to remain cautious about committing to a steady pace of tightening beyond that meeting.
Financial markets are currently pricing in three ECB rate hikes over the next year, with the first move expected in July and the last anticipated by February.
