ECB's Rehn Sees Inflation Anchored at 2% as June Rate Hike Nears

5 articles · Updated · Reuters · May 21

Olli Rehn said euro-area inflation still shows few signs of becoming entrenched, with medium- and long-term expectations anchored at the ECB’s 2% target despite a recent energy-driven spike.
June 11 borrowing-cost decisions will hinge on updated ECB projections and whether the U.S.-Iran conflict eases, though Reuters sources said the case for a hike is nearly sealed.
Oil disruptions through the Strait of Hormuz have pushed euro-area inflation well above target, but Rehn said softer gas prices and moderating wage growth have limited second-round effects so far.
Markets see the ECB deposit rate rising from 2% to 2.50%-2.75% over 12 months, but Rehn said policymakers will act independently rather than follow market pricing.
Rehn said a prolonged Iran conflict is more likely than a ceasefire, urging EU contingency planning for Gulf fuel supplies while warning governments against broad fuel subsidies.

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