Eurozone inflation persistence may require further tightening, though a July move is unlikely, ECB’s Wunsch suggests.
A European Central Bank policymaker indicated another rate hike may be needed to combat inflation remaining above the 2% target for several quarters. However, the official ruled out immediate action in July, favoring a potential move after the summer.
Markets currently price a 32% chance of a July hike, with September seen as more likely at 64%. Recent declines in oil prices and softer inflation data from France, Germany, and Italy support the case for delaying action until more summer data is available.
The ECB remains cautious about second-round effects from the energy shock, which could prolong price pressures. Policymakers are awaiting further evidence before committing to additional tightening.