ECB Officials Signal June Rate Hike Amid Rising Inflation and Oil Prices
Two top European central bankers, Isabel Schnabel and Philip Lane, signaled a likely interest rate hike in June. They warned that high oil prices are fueling wider inflation, exceeding previous ECB forecasts. Investors expect two rate rises this year, pushing Eurozone borrowing costs to 2.5%.
Two top European central bankers, Isabel Schnabel and Philip Lane, indicated a likely interest rate hike in June due to high oil prices fueling broader inflation. Schnabel, an ECB executive board member, stated a June rate hike would be needed, noting that ignoring the energy shock from the Middle East conflict is no longer an option.
ECB chief economist Lane added that the scenario of ignoring temporary energy price spikes becomes less likely as the Gulf conflict persists. Investors currently anticipate two quarter-point rate rises this year, pushing Eurozone borrowing costs to 2.5%, the highest since March 2025.
Both policymakers warned that current inflation pressures exceed ECB expectations from March forecasts, which predicted 2.6% average annual inflation for 2026 in a baseline scenario. Lane expects the ECB to revise its inflation forecast upwards on June 11th, while Schnabel predicts inflation will rise towards 4% by year-end, up from 3% in April. They emphasized no pre-commitment beyond June, with Schnabel suggesting the March baseline incorporated market expectations of two hikes.