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ECB Signals Readiness to Act on Energy Shock as Inflation Concerns Mount

European Central Bank officials indicated the institution may need to raise interest rates in June as persistent energy price shocks threaten to broaden inflation across the eurozone economy. Governing Council members Joachim Nagel and Francois Villeroy de Galhau said the ECB is moving away from its baseline scenario due to the sustained nature of the current energy supply disruption. While Villeroy noted that second-round inflation effects have not yet materialized broadly across the economy, fellow Governing Council member Madis Muller argued there is a strong case for a rate increase next month. Pierre Wunsch added that a June hike becomes increasingly likely if the Iran conflict persists. The comments reflect growing concern among policymakers that energy-driven inflation could eventually spread to wages and broader price-setting behavior.