Sources said ECB policymakers are prepared to raise the policy rate at the
September meeting, lifting it from 2.25% to 2.50% to offset economic fallout
from the Iran conflict, but have no intention of signaling further tightening
beyond September. Euro area inflation is near 3%, the conflict persists and
growth shows resilience; the September hike is already built into the ECB’s June
economic projections and is aimed at avoiding a repeat of the 2022 energy-driven
inflation surge. Long-term inflation expectations remain anchored near the 2%
target. Markets currently price one to two additional ECB hikes as possible.
