European Central Bank Officials Signal June Rate Hike, With Limited Guidance Beyond June

European Central Bank officials have continued to lean firmly toward a June interest-rate increase since the last meeting, without pushing back against market pricing.

According to Jin10, analyst Justin McQueen said policymakers broadly view upside inflation risks as sufficient to justify a policy adjustment, even if the Middle East conflict is resolved.

McQueen said the ECB has deliberately avoided providing clear guidance on the rate path after June, while offering some marginal signals. Governing Council member Nagel reiterated that the baseline expectation implies two rate hikes. Governing Council member Makhlouf acknowledged market pricing for two to three hikes, which McQueen described as a mild endorsement of current expectations.

McQueen added that the absence of opposing voices suggests the Governing Council is broadly comfortable with at least two hikes. However, he said the bar for a further hawkish repricing in markets remains high.

Markets currently expect the probability of three rate hikes by year-end to be about 72%, McQueen said. He added that a meaningful shift toward a more hawkish market view would likely require the ECB to signal more persistent inflation concerns or to confirm that additional rate increases are on the agenda.