MNI BRIEF: ECB's Wunsch Sees Possible September Hike

The European Central Bank could raise rates in September after the hike already flagged for July, Belgian National Bank Governor Pierre Wunsch said on Friday.

Eurozone core inflation is proving sticky, said Wunsch, presenting BNB economic projections. May’s data was better, but helped by one-off factors such as cut-price train tickets in Germany.

“We don’t really see the beginning of a slowdown,“ he said.

While Wunsch noted ECB President Christine Lagarde was clear that holding rates in July would be a “very big surprise”, September’s decision will depend on data, particularly core inflation.

“We have another three readings [before the September meeting] and if it remains around 5% on a yearly basis there is a very good chance we will hike again in September,” he said, adding that there was currently no discussion of any pause in hikes.

Wunsch noted risks including the eurozone’s remaining dependency on Russian gas and possible supply bottlenecks during the green transition. (See MNI INTERVIEW: EU Risks Winter Gas Squeeze -German Energy Head)

“There is a path for inflation to go to 2% in 2025, but it’s a relatively narrow path and depends on real wages going back to the levels of 2019,” he said.