{"id":41708,"date":"2026-05-14T09:25:09","date_gmt":"2026-05-14T09:25:09","guid":{"rendered":"https:\/\/www.europesays.com\/europe\/41708\/"},"modified":"2026-05-14T09:25:09","modified_gmt":"2026-05-14T09:25:09","slug":"ecb-warns-of-possible-interest-rate-hike","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/europe\/41708\/","title":{"rendered":"ECB warns of possible interest rate hike"},"content":{"rendered":"

The European Central Bank (ECB) is moving toward raising interest rates to prevent the oil price shock from creating spiraling inflation, writes Politico.<\/a><\/p>\n

Speaking to Politico, Alexander Demarco, the governor of the Bank of Malta, expressed a view that differs from other policymakers who have called for patience and more data before making firm decisions. He agreed that the ECB should remain confident in the data and make decisions from meeting to meeting, but did not express optimism about the direction in which the information is pointing. Demarco said in an interview on the 11th of May that hopes of getting through the oil price shock are fading, and it looks like the conflict will be prolonged and oil prices will remain high.<\/p>\n

Even if the war in Iran ends before the ECB meets on the 11th of June, energy markets may not cool down enough to allow interest rates to remain at their current levels. Demarco said the damage to infrastructure is so extensive that energy prices will still be higher than before the conflict. Nor will a lasting ceasefire restore supply routes if shipping through the Strait of Hormuz remains dangerous.<\/p>\n

This is the second major energy shock Europe has seen in four years. After Russia\u2019s full-scale invasion of Ukraine in February 2022, the ECB initially viewed the rise in energy prices as a temporary problem, but they have had a ripple effect across the economy, pushing up inflation expectations and wages, eventually pushing inflation above 10%.<\/p>\n

The ECB left interest rates unchanged at its April meeting,<\/p>\n

despite inflation rising above 3%, saying that the medium-term outlook still showed price pressures easing. At the same time, the ECB signaled that interest rates could rise in June. Demarco has vowed not to repeat the mistakes made in 2022 and said policymakers must stop the inflationary pressure caused by rising energy prices and its impact on the medium-term outlook. While there are no signs of a sharp rise in inflation yet, he warned that this is just the beginning and such things do not happen overnight.<\/p>\n

Demarco declined to comment on how many times interest rates will need to be raised. The ECB is committed to shaping monetary policy so that inflation stabilizes at 2% in the medium term, and this could be achieved with a single interest rate hike, but it is equally possible that it will have to be done several times. Markets are currently pricing in three ECB rate hikes, while most economists expect a more dovish approach.<\/p>\n

The ECB\u2019s dilemma is that raising rates at a time when energy supplies are disrupted will hit an already weakened economy further. As a result,<\/p>\n

several policymakers are calling for a more cautious approach and for the data to be more accurate<\/p>\n

in determining whether a rate hike is necessary.<\/p>\n

Several economists, including Holger Schmieding, chief economist at Berenberg Bank, and Stefan Gerlach, chief economist at EFG Bank, have urged the ECB to be patient. Schmieding wrote in an open letter on the 11th of May that the Iran war and its aftermath are having a severe impact on the economy: \u201cWith growth weak and unemployment rising, workers are unlikely to be able to push through excessive wage demands. Companies, too, will struggle to pass on all additional costs to customers.\u201d<\/p>\n

Demarco supports the ECB\u2019s forecasts that a recession can be avoided, but acknowledged the risk that the crisis could become severe enough to force a shift to fuel economy. If that happens, there is a real risk of a recession, but that point insn\u2019t reached yet.<\/p>\n

Read also: Iran war heightens inflation concerns; ECB to act tough<\/a><\/p>\n

Follow us on\u00a0Facebook<\/a>\u00a0and\u00a0X<\/a>!<\/p>\n","protected":false},"excerpt":{"rendered":"The European Central Bank (ECB) is moving toward raising interest rates to prevent the oil price shock from…\n","protected":false},"author":2,"featured_media":41709,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2388],"tags":[26698,2803,1858,7063,633,2752,303,920],"class_list":{"0":"post-41708","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-european-central-bank","8":"tag-alexander-demarco","9":"tag-ecb","10":"tag-european-central-bank","11":"tag-featured","12":"tag-inflation","13":"tag-interest-rates","14":"tag-iran","15":"tag-strait-of-hormuz"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts\/41708","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/comments?post=41708"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts\/41708\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/media\/41709"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/media?parent=41708"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/categories?post=41708"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/tags?post=41708"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}