ECB officials signal potential interest rate hike amid rising inflation and energy costs

Eurozone inflation rose to 2.5% in March, up from 1.9% in February, according to data released by Eurostat. This increase has led members of the European Central Bank (ECB) Governing Council to consider shifting their base economic scenario to an adverse forecast. Irish central banker Gabriel Makhlouf noted that the ongoing conflict in Iran is driving higher energy prices, which could persist. The adverse scenario, now considered likely by several officials, anticipates inflation hitting 4.2% and a recession during the second quarter. Estonian central banker Madis Müller stated that an interest rate hike as early as April cannot be ruled out if energy costs remain high. Similarly, Estonian official Primoz Dolic stated that the current adverse scenario may soon become the base scenario for the ECB. Despite this uncertainty, officials emphasized that the ECB will remain proactive. Croatian central banker Boris Vujcic also acknowledged the significant impact of energy prices on economic forecasts.