As the European Central Bank (ECB) approaches its June 11 policy meeting, key policymakers have expressed a strong inclination towards a rate hike to combat rising inflation. This comes amid ongoing concerns about energy prices and supply chain disruptions.

Persistent Inflation Concerns

Isabel Schnabel, an ECB board member, emphasized the need for a monetary policy reaction due to the lasting damage to energy infrastructure and global supply chains, even if the current conflict were to end immediately. Schnabel stated, “From today’s perspective, I think a rate hike in June will be needed.”

Philip Lane, the ECB’s Chief Economist, highlighted the likelihood of an upward adjustment to the inflation forecast in June. He noted that many firms anticipate raising prices, which could transform the current energy shock into a broader inflation issue.

Calls for Policy Recalibration

Fabio Panetta, Governor of the Italian Central Bank, called for a recalibration of monetary policy to address persistent inflationary pressures. He expressed skepticism about a rapid normalization of oil and gas prices, even if the conflict is resolved swiftly.

Yannis Stournaras, Governor of the Greek Central Bank, advocated for a balanced response to any significant but temporary overshooting of the inflation target. He suggested a cautious adjustment of monetary policy to limit second-round effects without disproportionately harming economic activity.

Decisive Action Urged

Álvaro Santo Pereira, Chief of the Portuguese Central Bank, stressed the importance of acting swiftly to prevent a greater second-round impact from inflationary spirals. He emphasized the need for decisive action based on past experiences with inflation.

Olli Rehn, Finnish Central Bank Chief, noted some short-term fluctuations in inflation expectations but no significant deviations in medium- to long-term expectations. He stressed the importance of monitoring for signs of second-round effects and de-anchoring of inflation expectations.

Martin Kocher, Austrian Central Bank Governor, and Peter Kazimir, Slovak Central Bank Governor, both indicated that an interest rate move is likely unavoidable if the situation does not improve significantly. Kazimir mentioned that policy tightening in June has been part of their baseline since March.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.