ECB Governing Council member Madis Muller says a quick end to Strait of Hormuz disruptions is needed to avoid a June rate increase.
European Central Bank policymaker Madis Muller indicated the ECB will likely raise interest rates in June unless the Strait of Hormuz reopens swiftly. The closure, driven by US-Iran tensions, has elevated oil prices and inflation while dampening economic activity in the Eurozone.
Recent data showed Eurozone GDP grew just 0.1% in Q1, with a sharper slowdown expected in Q2. Purchasing Managers’ Index (PMI) readings also signaled weakening economic momentum alongside persistent price pressures. ECB President Christine Lagarde has described the current environment as one of “double uncertainty” due to energy shocks and potential wage-price spirals.
Muller’s remarks contrast with earlier ECB caution, as officials now suggest at least two rate hikes may be needed this year if oil prices remain elevated. The ECB aims to avoid repeating 2022’s delayed response to inflation but faces balancing growth risks against price stability.