ECB's Wunsch Says Another Rate Hike Could Come as Soon as July

Overview

• The ECB raised interest rates last week for the first time in three years and its deposit rate now stands at 2.25 percent.
• Pierre Wunsch told Reuters the bank could raise rates again in July if inflation spreads beyond energy into services and pay, and he said a precautionary 25 basis point step could later be reversed.
• A provisional US–Iran agreement pushed oil prices down and eased near‑term headline inflation risks, but Wunsch warned that falling energy costs do not remove the risk from persistent service‑sector price growth.
• Financial markets currently price a 25 basis point move in September or October and some ECB officials told Reuters they see September as the more likely timing unless oil rebounds, while Wunsch said he would only defend waiting if incoming data were inconclusive.
• The policy outlook is now highly data dependent, so households and businesses should watch upcoming euro‑area inflation prints for services and wage readings that could determine whether the ECB tightens again or pauses.