ECB’s Villeroy is saying that:
- Not seeing sufficient signs yet to raise rates
- Will raise rates if second-round effects are seen
The European Central Bank left its key interest rates unchanged at last week’s April 30 meeting, maintaining the deposit rate at 2.00% while emphasizing a data-dependent, meeting-by-meeting approach amid heightened uncertainty. Policymakers acknowledged that while the baseline inflation outlook had not materially changed, risks have shifted meaningfully—tilted to the upside for inflation and to the downside for growth, largely driven by the Middle East conflict and the resulting surge in energy prices.
President Christine Lagarde stressed that the ECB is “moving away from the baseline” and needs more clarity on how persistent the energy shock will be, noting that longer-term inflation expectations remain anchored but short-term pressures have risen.
Since the meeting, ECB officials have taken on a more hawkish tone, signaling that policy tightening could resume soon if inflation risks persist. Bundesbank President Joachim Nagel said a June rate hike is possible—even likely—if inflation does not improve, with concerns focused on second-round effects from higher energy costs feeding into wages and broader prices. Other policymakers have echoed that view, and market pricing now leans toward multiple hikes later this year.
Overall, the messaging since the meeting suggests the ECB is on hold for now but leaning toward tightening, with June shaping up as a key decision point depending on incoming inflation and energy market dat
