ECB may adjust interest rates soon if inflation outlook fails to improve
Updated
Updated · Reuters · May 11
ECB may adjust interest rates soon if inflation outlook fails to improve
11 articles · Updated · Reuters · May 11
In remarks published on Monday, Governing Council member Martin Kocher told Switzerland's Neue Zuercher Zeitung that markets should not pre-empt the ECB's 11 June meeting.
He said April's pause was justified, but persistently high energy prices linked to the Iran conflict would make delaying tighter policy difficult and could raise second-round inflation risks.
Kocher also warned the Middle East conflict had jeopardised recovery in Germany and Austria, saying stagflation risks could not be ruled out despite resilient labour markets and weaker demand.
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Eurozone Inflation and ECB Rate Hikes in 2026: Navigating Middle East Conflict, Energy Shocks, and Stagflation Risks
Overview
In early May 2026, the escalation of the Middle East conflict—driven by a U.S.-led confrontation with Iran—created significant uncertainty and disrupted regional economic activities, such as vessel operations in the Gulf. This turmoil pushed up energy prices, which in turn heightened inflationary pressures across the Eurozone. The European Central Bank responded by adopting a cautious but proactive stance, closely monitoring for second-round effects like wage increases. As a result, the ECB is expected to raise interest rates to control inflation, even as these actions risk slowing economic growth and increasing the threat of stagflation.