ECB to Hike Rates in June as 2026 Inflation Jumps, Survey Shows
The European Central Bank will raise interest rates in June as the Iran war drives inflation higher this year, a Bloomberg survey showed.
The quarter-point increase is likely to be the only such move, however, as the conflict won’t cause a long-lasting price shock, according to the April 9-15 poll.
Inflation is predicted to accelerate to 2.8% this year — up from a prior prediction of 2%. It’s then expected to fall back to 2.1% in 2026 and 2% in 2027 — in line with the ECB’s target.
ECB officials are currently leaning toward keeping rates on hold when they next meet at the end of April, according to people familiar with the debate. Some, including Bundesbank President Joachim Nagel, argue that action at that point can’t be excluded.
When economists were last polled, before the ECB’s March meeting, they predicted the central bank would sit out the conflict without any response. Investors have been pricing more forceful action and are currently betting on two hikes this year.
The fighting in the Middle East and resulting spike in energy costs have put the ECB in a tricky spot as raising borrowing costs would crimp a nascent economic recovery in the 21-nation euro zone.
Analysts reckon output will rise just 0.9% this year — down from an earlier forecast of 1.2% as higher energy prices weigh on companies and households. Growth is then seen picking up to 1.3% in 2027 and 1.4% in 2028.
bloomberg.com
