Overview
- By May 21, several ECB Governing Council members said a rate increase at the June 11 meeting would be likely or unavoidable if shipping through the Strait of Hormuz remains disrupted.
- Four Reuters sources told reporters the case for a June hike is 'nearly sealed' while the ECB intends to stay data-dependent and avoid committing to a follow-up move in July.
- Disruptions linked to Iran have driven oil and energy prices up and lifted headline euro-area inflation to about 3%, shifting the outlook toward the ECB's 'adverse scenario' of slower growth and higher inflation.
- The Bank of Japan has signalled parallel tightening pressure, with BOJ board member Junko Koeda saying underlying inflation is around 2% and supporting further rate rises, which has raised odds of a June BOJ move.
- Markets have repriced policy paths for major central banks, pushing up bond yields and tightening financial conditions in ways that could slow growth and raise borrowing costs for households and businesses.