BMO analysts say some ECB governing council members are inclined to act and
expect a rate hike at the June 11 meeting, with a risk of a follow-up increase
as early as July. Since the outbreak of the Iran conflict, the RESERVE BANK OF
AUSTRALIA and NORWAY C.BANK have already tightened, and the ECB would be the
first G7 central bank to move. Eurozone inflation has not eased since the last
meeting; worries that the Iran conflict’s duration or a fragile peace could
boost inflation expectations and wage pressures, alongside rising stagnation
risk, are prompting a shift toward tightening. The ECB must tread carefully, but
additional hikes remain possible.
