Markets price 93% odds of a June ECB hike as policymakers weigh inflation against slowing growth.
The European Central Bank is poised to deliver a 25-basis-point rate hike in June as an “insurance” move against persistent inflation, according to Governing Council consensus. The decision follows warnings of a global supply shock driving lower growth and higher prices, with sentiment indicators and services PMIs already reflecting weakening demand.
Policymakers plan to pause after June, awaiting data through September, including developments in the US-Iran situation. Markets have priced in a 93% probability of a June hike and 57 bps of total tightening by year-end. The ECB will monitor inflation expectations and second-round effects to guide further action.
The comments underscore concerns over stagflation risks, with the net inflationary impact of the shock partly offset by a slowing economy. No immediate market reaction was specified in the remarks.