Overview
- Several ECB Governing Council members, including Martin Kocher and Bundesbank chief Joachim Nagel, have said a rate increase at the June 11 meeting is likely if disruptions to shipping through the Strait of Hormuz continue.
- Reuters and other sources report the bank is expected to keep options open on a follow-up move in July and will decide meeting by meeting based on incoming data and new projections.
- Markets have already moved to price several ECB rate increases over the next 12 months, pushing up bond yields and tightening financial conditions that themselves affect policymakers' choices.
- Bank of Japan board member Junko Koeda said underlying inflation is roughly 2 percent and argued for continued rate rises ahead of the BOJ’s mid‑June meeting, while Bank of England officials led by Andrew Bailey say cuts are off the table and further hikes would be needed only if the energy shock becomes far worse.
- A sustained energy shock could force central banks to act to protect credibility but would also slow growth and raise borrowing costs for households and businesses and drain liquidity from risk assets such as stocks and crypto.