FRANKFURT, April 30 (Reuters) – European Central Bank policymakers are likely to raise interest rates at least twice, starting at their next meeting in June, unless a favourable resolution to the Iran conflict quickly drags energy prices to pre-war levels, two sources close to the discussion told Reuters.
The ECB left interest rates unchanged as expected on Thursday but signalled its rising concerns over soaring inflation as disruptions to the flow of fuel and other products the Strait of Hormuz pushes up costs for the energy-importing euro zone.
Sources speaking on condition of anonymity said they expected a first rate increase in June if the situation continued as it was, with traffic disrupted and spot Brent prices above $100 a barrel.
Citing the ECB’s baseline projections, published in March, the sources said at least two rate hikes should be expected in this scenario.
Some of these prospects were already discussed at Thursday’s meeting, when a few policymakers argued in favour of a rate increase.
One of the sources said that Thursday’s discussion was mostly about June and there was little disagreement around the table that policy action will be necessary, unless there is a fundamental change in the outlook.
A second source stressed the outlook could still change if a deal between the United States and Iran brought the conflict to an end and caused energy prices to drop.
An ECB spokesperson declined to comment.
(Reporting by Francesco Canepa and Balazs Koranyi)
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