Overview
- Markets and a Reuters poll show the ECB is expected to lift the deposit rate by 25 basis points to 2.25% at the June 11 policy meeting.
- Eurozone inflation data for May strengthened the case for action with headline CPI at 3.2% year‑on‑year and core CPI at 2.5%, driven by a sharp rise in energy prices.
- Senior ECB policymakers have publicly described a June move as necessary to prevent second‑round effects such as wage‑price feedback and the de‑anchoring of inflation expectations.
- Economists and markets widely price another hike later in the year, most likely September, but further tightening faces limits from a slowing economy and rising stagflation risk.
- The spike in oil tied to tensions around Iran and disruptions through the Strait of Hormuz matters because about one‑fifth of global oil passes there and continued disruption would keep inflation high and complicate the ECB’s path.