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2026-05-23 16:52:34
[Inflation Stickiness Exceeds Expectations, ECB May Have to Raise Rates in June] ⑴ ECB Governing Council member Stournaras clearly stated that maintaining the central bank's credibility is a strong argument for raising interest rates next month. He pointed out that due to the prolonged failure to reach a US-Iran peace agreement, the inflation outlook is deteriorating, and Eurozone consumers will sooner or later begin to doubt the credibility of policymakers' promises of "preparedness to respond." ⑵ "Raising interest rates has a cost—it affects people and employment—so I hope we don't have to raise rates," Stournaras admitted at a meeting of European finance ministers in Cyprus. "But if this situation continues and we don't raise rates, it will be very troublesome. To maintain the ECB's credibility and response mechanism, we may have to raise rates in June." ⑶ Stournaras described two scenarios: if an agreement is reached, energy prices may fall rapidly, and interest rates may be able to remain at current levels; but if no agreement is reached, prices may rise further, and inflation will intensify. He admitted, "I feel that inflation is sticky," and the weak PMI is not very helpful, as there are too many rigid factors in the economy. (4) He worried that market expectations might get out of control, believing that the memory of past inflationary shocks was a burden that could force the ECB to take action. Even with weak economic data, sticky inflation and credibility considerations still put the option of raising interest rates on the table in June.
