A hawkish ECB policymaker warns geopolitical tensions may fuel inflation expectations, supporting near-term rate increases.
European Central Bank Governing Council member Pierre Wunsch stated inflation risks are escalating due to prolonged geopolitical crises, which could embed higher costs into expectations and core inflation. He indicated the ECB may need to act soon to prevent energy price shocks from spilling into wages and broader price pressures.
Wunsch, a known hawk, previously linked potential rate hikes to unresolved US-Iran tensions ahead of the ECB’s June meeting. Markets currently price in two to three rate increases by year-end, a scenario he described as comfortable. The ECB’s focus remains on averting second-round inflation effects.
No immediate market reaction was specified, but the remarks reinforce expectations for tighter monetary policy in the eurozone.