ECB Could Hike Rates in June Should Inflation Outlook Not Improve, Nagel Says
By Ed Frankl
The European Central Bank could hike interest rates at its meeting next month should eurozone inflation continue to pick up due to the impact of the Iran war, Germany's central bank governor said Monday.
The ECB announces its rate move on June 11, when staff will issue new macroeconomic projections for inflation and growth that are expected to take in the effect of continuing surging energy prices.
"Should the inflation outlook not show a marked improvement in these projections, this would point to an interest-rate hike," Bundesbank President Joachim Nagel said in a speech in Frankfurt.
The ECB last week held its key rate at 2.0%, though its President Christine Lagarde said that rate setters had discussed the possibility of a rate hike, opening the door for a move at the next meeting.
"I expect the fog to lift somewhat in June and for us to see more clearly where we are heading," Nagel added. "Our goal is clear: we want the inflation rate to return to 2% again in the medium term. We are aligning our monetary policy course accordingly."
The economic consequences of the conflict in the Middle East will keep policymakers occupied for some time to come, slowing the economy and fueling inflation, Nagel said.
Oil prices jumped on Monday as military tensions flared up in the Strait of Hormuz, after the United Arab Emirates said it was targeted by Iranian drones.
The longer the war persists, the greater the risk that inflation will remain elevated if monetary policy fails to act, Nagel noted.
Policymakers are watching closely to see if higher energy prices are feeding into other measures of inflation, such as through stronger wage demands, which could reinforce higher prices. The expectations of financial markets are also keenly watched, the Bundesbank chief said.
Investors expect between three and four rate hikes this year, with most anticipating one in June, according to LSEG.
Even with the last meeting's wait-and-see approach, Nagel said that the ECB was ready to act at any time.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
May 04, 2026 13:29 ET (17:29 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.The articles, information, and content displayed on this webpage may include materials prepared and provided by third parties. Such third-party content is offered for informational purposes only and is not endorsed, reviewed, or verified by Morningstar.
Morningstar makes no representations or warranties regarding the accuracy, completeness, timeliness, or reliability of any third-party content displayed on this site. The views and opinions expressed in third-party content are those of the respective authors and do not necessarily reflect the views of Morningstar, its affiliates, or employees.
Morningstar is not responsible for any errors, omissions, or delays in this content, nor for any actions taken in reliance thereon. Users are advised to exercise their own judgment and seek independent financial advice before making any decisions based on such content. The third-party providers of this content are not affiliated with Morningstar, and their inclusion on this site does not imply any form of partnership, agency, or endorsement.
Popular
3 Stocks to Sell and 3 Stocks to Buy for November
3 of the Best Dividend Stocks to Own
The 10 Best Companies to Invest in Now
It’s Been a Long Time Since Bonds Looked This Good
United States