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ECB minutes point to broad, persistent inflation behind June hike
The ECB said even a milder scenario with lower energy prices would not undo much of the inflation impact already feeding into the wider economy.
The minutes of the ECB’s June meeting reinforced the Governing Council’s view that inflation pressures have become too broad and persistent to wait before tightening policy, with members unanimously backing a 25 basis point rate hike, according to Action Forex.
Policymakers discussed how they now treat the Middle East energy shock not as a temporary supply disruption, but as a situation that no longer qualifies for “looking through” and where the option value of waiting for more information has diminished considerably. They said inflation has spread beyond energy prices, with increasing non-energy indirect effects, and that second-round effects are becoming more likely the longer the shock persists.
The ECB minutes also said core inflation is projected to remain above the ECB’s 2% target throughout the forecast horizon. They argued that supply chain disruptions, higher production costs, and firms’ pricing decisions would not simply reverse when oil prices fall, supporting the June increase across scenarios considered.
Despite the hawkish assessment, the minutes reaffirmed that policy will remain data-dependent and meeting-by-meeting, and that communication should refrain from guidance about the future interest rate path. The Governing Council reiterated its goal of returning inflation sustainably to 2%, while emphasizing policy flexibility as it assesses how higher energy costs feed into wages, inflation expectations, and broader euro area price-setting.