ECB Official Says Rate Hikes Increasingly Likely as Inflation Outlook Worsens

An ECB governing council member said substantial inflation pressures are expected to persist. The official told Handelsblatt that rate hikes are becoming increasingly likely and are no longer part of the baseline scenario. Policymakers are instead moving toward an adverse scenario.

The comments reflect growing concern over the inflation trajectory in the euro zone. The official noted that authorities still have quite a bit of inflation ahead of them. This assessment comes as recent data have shown price pressures easing more slowly than anticipated.

The governing council member indicated that the central bank is adjusting its economic projections. Rate increases, once viewed as unlikely in the main forecast, are now seen as more probable. The official did not specify the timing or magnitude of any potential hikes.

Markets will closely watch upcoming ECB meetings for further signals on the policy path. The central bank's next decision is scheduled in June. Officials have previously emphasized that decisions will remain data-dependent. The remarks underscore the challenges facing European monetary policymakers as they balance risks of both excessive inflation and economic slowdown.

The ECB has been gradually reducing its key interest rates after a period of aggressive tightening to combat post-pandemic price surges.