PGIM economist Katharine Neiss stated on Bloomberg Television that her baseline expectation is for the European Central Bank (ECB) to implement a 25 basis point interest rate hike at its June meeting. This prediction is influenced by the accelerating consumer prices in France and Spain, which have reached their fastest pace since 2024.
This development suggests that inflation in key Eurozone economies remains above the ECB's comfort zone, strengthening the argument for monetary tightening. The latest data indicated that May inflation readings for France, Italy, and Spain quickened to 2.8%, 3.3%, and 3.6% respectively. While Germany's headline inflation moderated, it still stood at 2.7%, well beyond the ECB's target.
The ECB had previously raised interest rates for the first time since 2023 on June 11, 2026, lifting the deposit rate to 2.25% from 2%. This initial hike was driven by concerns that inflation, spurred by the Iran war, was spreading beyond just energy costs. Economists and investors had anticipated this move and expected another quarter-point increase in September, though the ECB has maintained a data-dependent stance without pre-committing to future actions.
