ECB Signals Possible July Rate Hike as Middle East War Fuels Inflation
By Aboki Forex —
The European Central Bank is ready to raise interest rates again next month if the Middle East conflict keeps pushing prices up. That is according to ECB Governing Council member Joachim Nagel.
Nagel, who also heads Germany's central bank, said the fallout from the war is too strong to ignore. He said the ECB had to hike the deposit rate on Thursday even if the situation calms down quickly. High energy costs are now affecting core inflation, he added.
The ECB raised borrowing costs for the first time since 2023 on Thursday. It became the first major central bank to react to inflation caused by the Iran war. Consumer prices in Europe rose more than 3% in May. Business activity is also falling.
“We are keeping all our options open and are ready to respond once again, should we have to,” Nagel said in emailed comments on Friday. He said the ECB's data-dependent approach remains the right one.
ECB President Christine Lagarde warned on Thursday that the energy shock is spreading through the economy. Markets expect two more quarter-point hikes to control prices. Another move could come as soon as July if the situation does not improve.