ECB, Cipollone: Base scenario more distant, probability of rate hike increases

"The current situation seems to deviate from the baseline scenario of our March projections, increasing the likelihood that an adjustment of our reference rates will be necessary". This was said by ECB Executive Board member Piero Cipollone, speaking at the Festival of Sustainable Development 2026 in Milan.

"Our starting position," Cipollone said, "puts us in a position to gain more information on the intensity and likely duration of the shock. At the same time, "the memory of the previous energy shock is still alive and could lead to a faster adjustment of inflation expectations. Short-term inflation expectations, non-labour input costs and firms' expectations of selling prices have indeed risen.

However, medium-term inflation expectations have so far remained well anchored and core inflation measures remain close to our target. Nevertheless, we pay attention to possible signs of a decoupling of medium- to long-term inflation expectations. In particular, we will examine the indirect transmission of higher energy costs to the prices of the entire consumption basket, as well as possible second-round effects."