ECB Officials Signal Further Rate Hikes Likely as Inflation Remains Too High

European Central Bank policymakers signaled Tuesday that additional interest rate increases are likely, with Governing Council member Pierre Wunsch stating the ECB will probably have to hike again and noting his views have not changed dramatically since September. Wunsch's comments reinforced a hawkish stance among officials despite some stabilization in broader economic conditions.

ECB President Christine Lagarde attributed the recent rise in inflation primarily, though not exclusively, to energy costs, and emphasized that second-round effects, namely the feeding of energy-driven price pressures into broader wages and prices, have not emerged so far. She said policymakers are actively monitoring collective bargaining data for early signals of wage growth, underscoring the ECB's intent to act preemptively rather than wait for risks to fully materialize.

Lagarde characterized the eurozone growth outlook as modest but not alarming, noting a projected 1.1% expansion in 2026 and saying the figure, while not strong, is acceptable. She stressed the ECB cannot wait until inflationary signals become obvious and must instead anticipate and look for clues, reinforcing the bank's forward-leaning approach to policy as it weighs the timing and pace of any further tightening.