• ECB policymakers increasingly see a June rate hike as likely, according to sources.
• Discussions around a possible July move remain open with no clear commitment.
• Several members prefer to wait for September economic projections before considering another step.

The European Central Bank (ECB) could raise interest rates in June as the inflation outlook shifts toward a more adverse scenario, according to Reuters citing sources familiar with the discussions. The development suggests growing concern within the institution over the risk of more persistent inflationary pressures.

However, the sources indicate that policymakers are likely to remain cautious regarding the next stage of the monetary policy cycle. A decision for July does not appear predetermined, and the institution’s communication could deliberately retain flexibility to avoid sending an overly firm signal to markets.

According to Reuters, several Governing Council members would prefer to wait for the September economic projections before deciding whether an additional step is necessary. This approach reflects a willingness to gain more visibility on the inflation path and on evolving economic conditions before entering a new phase of monetary tightening.

Key takeaways

ECB rate hike very likely in June as inflation outlook moving towards adverse scenario.
ECB likely to be noncommittal about July.
Many ECB policymakers would prefer to wait until September projections to decide if follow-up step needed.

Market reaction

The Euro (EUR) reacted positively to the Reuters report, with EUR/USD climbing toward 1.1630 at the time of writing, up 0.22% on the day.