An ECB policymaker warns inflation risks from prolonged Middle East conflict may force a June rate increase.
A European Central Bank Governing Council member stated a June rate hike is unavoidable if the Strait of Hormuz remains closed, citing escalating inflation risks. The official emphasized that prolonged conflict would materially push eurozone inflation higher, complicating the ECB’s 2% target.
Recent weak economic data contrasts with Austria’s relatively stable first-quarter performance, where 0.5% full-year growth remains possible if the Iran conflict eases. However, budget consolidation efforts face challenges amid external shocks, limiting policy options for governments.
The ECB’s June 11 meeting decision hinges on developments over the next three weeks, though current conditions suggest little alternative to tightening if the strait stays shut.