A Governing Council member signals a June hike to reinforce the 2% inflation target amid market expectations of multiple moves.
The European Central Bank is likely to raise interest rates in June to demonstrate its commitment to the 2% inflation target, according to ECB Governing Council member Alexander Demarco. The move is seen as an “insurance” step rather than a necessity, with policymakers cautious about over-tightening.
Market expectations currently price in nearly three rate hikes by year-end, but Demarco indicated the ECB may not validate such aggressive forecasts. He noted that medium-term inflation expectations remain anchored, with limited evidence of indirect inflation effects.
The 2026 inflation outlook may be revised higher, and upcoming projections will determine whether one hike suffices or further action is needed. Demarco’s remarks suggest the June decision could disappoint markets anticipating a more hawkish path.