ECB May Face Pressure to Raise Rates as Energy Market Risks Intensify

(MENAFN) Experts suggest that the European Central Bank (ECB) could come under increasing pressure to reconsider interest rate policy if ongoing geopolitical tensions continue to destabilize energy markets.

According to reports, analysts believe the ECB is likely to keep interest rates steady in the near term. However, they also point to growing uncertainty linked to developments in the Middle East conflict, particularly risks surrounding key energy routes such as the Strait of Hormuz. Fluctuations in oil and natural gas prices are also contributing to concerns about future inflation dynamics.

Economists warn that if elevated energy prices persist, they could disrupt the eurozone’s ongoing disinflation trend. This, in turn, may push the central bank to reassess its current policy direction.

Speaking to Anadolu, an ING Group chief economist noted that the ECB is expected to hold rates at its upcoming April meeting. He added that some members of the ECB’s Governing Council have indicated there is currently no immediate trigger for urgent policy changes.

He also suggested that a rate increase of 50 basis points by the end of the year remains possible.

Referring to recent economic data, he pointed out that April Purchasing Managers’ Index (PMI) figures showed producer price inflation reaching a 37-month high, even as overall economic growth slowed.

He further emphasized that ECB President Christine Lagarde had previously highlighted the importance of monitoring firms’ pricing expectations during the March press conference. This focus, he said, means markets will be closely watching for any signals about how the ECB interprets future inflation risks. He concluded that even if conditions remain stable for now, the likelihood of a rate increase later in the year has clearly risen.

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